Question 1

Real interest rates at times have been negative. Why would anyone lending money agree to a negative real interest rate?

Accepted Answer

The lender did not agree to a negative r

Question 2

Suppose 180,000 people are employed, 20,000 people are unemployed, the working-age population is 250,000, and 50,000 people are not in the labor force. Calculate the unemployment rate.

Accepted Answer

The unemployment rate is calculated as:

Question 3

Which of the following price indices comes closest to measuring the cost of living of the typical household?

Accepted Answer

A)  GDP deflator 
B)  producer price index 
C)  consumer price index 
D)  household price index 
A)  GDP deflator 
B)  producer price index 
C)  consumer price index 
D)  household price index

Question 4

Table 20-7
  
-Refer to Table 20-7. Suppose that the data in the table above reflect price levels in the economy. What is the inflation rate between 2017 and 2018?

Accepted Answer

A)  2.9% 
B)  3.5% 
C)  4.6% 
D)  5% 
E)  7.5% 
A)  2.9% 
B)  3.5% 
C)  4.6% 
D)  5% 
E)  7.5%

Question 5

In the United States, the typical person who has lost his or her job finds another one in a few months except during severe recessions.

Accepted Answer

A) True 
 B)False

Question 6

The deflation of the 1930s impacted the U.S. economy because it led some consumers to ________ and because it ________.

Accepted Answer

A)  postpone purchases while they waited for prices to fall even lower; increased the burden on borrowers 
B)  demand higher wages in anticipation of prices eventually rising again; increased manufacturing since firms could afford to hire more labor 
C)  borrow more money since money was now cheap; reduced the amount of money consumers would have to pay back on their outstanding loans 
D)  increase purchases to take advantage of the falling prices; increased the burden on lenders 
A)  postpone purchases while they waited for prices to fall even lower; increased the burden on borrowers 
B)  demand higher wages in anticipation of prices eventually rising again; increased manufacturing since firms could afford to hire more labor 
C)  borrow more money since money was now cheap; reduced the amount of money consumers would have to pay back on their outstanding loans 
D)  increase purchases to take advantage of the falling prices; increased the burden on lenders

Question 7

The nominal interest rate equals the real interest rate ________ the inflation rate.

Accepted Answer

A)  times 
B)  divided by 
C)  plus 
D)  minus 
A)  times 
B)  divided by 
C)  plus 
D)  minus

Question 8

What are some reasons why the unemployment rate is typically lower in the United States as compared to Canada and some Western European countries?

Accepted Answer

Workers in Western Europe and Canada are

Question 9

Table 20-14
   The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 20-14. The real average hourly earnings for 1965 in 2010 dollars equal

Accepted Answer

A)  $3.87. 
B)  $5.80. 
C)  $12.10. 
D)  $18.14. 
A)  $3.87. 
B)  $5.80. 
C)  $12.10. 
D)  $18.14.

Question 10

If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level, we would base our measure of inflation on

Accepted Answer

A)  the producer price index. 
B)  the consumer price index. 
C)  the GDP deflator. 
D)  the household price index. 
A)  the producer price index. 
B)  the consumer price index. 
C)  the GDP deflator. 
D)  the household price index.

Question 11

By offering training to workers whose firms laid them off because of competition from foreign firms, the federal government is attempting to reduce

Accepted Answer

A)  frictional unemployment. 
B)  structural unemployment. 
C)  cyclical unemployment. 
D)  seasonal unemployment. 
A)  frictional unemployment. 
B)  structural unemployment. 
C)  cyclical unemployment. 
D)  seasonal unemployment.

Question 12

An increase in cyclical unemployment will result in

Accepted Answer

A)  an increase in the natural rate of unemployment. 
B)  an increase in the unemployment rate. 
C)  an increase in structural unemployment. 
D)  a decrease in frictional unemployment. 
A)  an increase in the natural rate of unemployment. 
B)  an increase in the unemployment rate. 
C)  an increase in structural unemployment. 
D)  a decrease in frictional unemployment.

Question 13

During the 1990s, Japan experienced periods of deflation and very low nominal interest rates, approaching zero percent. Why would lenders of money agree to a nominal interest rate of almost zero?

Accepted Answer

With the deflation, the real i

Question 14

Figure 20-1  
-Refer to Figure 20-1. Based on the graph of the labor market above, if a minimum wage is set at $5 per hour, which of the following will occur?

Accepted Answer

A)  The unemployment rate will rise. 
B)  The unemployment rate will fall. 
C)  The level of unemployment will rise, but the percentage of the labor force unemployed will not change. 
D)  None of the above will occur. 
A)  The unemployment rate will rise. 
B)  The unemployment rate will fall. 
C)  The level of unemployment will rise, but the percentage of the labor force unemployed will not change. 
D)  None of the above will occur.

Question 15

When deflation occurs

Accepted Answer

A)  the real interest rate is greater than the nominal interest rate. 
B)  the nominal interest rate is greater than the real interest rate. 
C)  the nominal interest rate is equal to the real interest rate and inflation is negative. 
D)  the nominal interest rate is equal to the real interest rate and inflation is positive. 
A)  the real interest rate is greater than the nominal interest rate. 
B)  the nominal interest rate is greater than the real interest rate. 
C)  the nominal interest rate is equal to the real interest rate and inflation is negative. 
D)  the nominal interest rate is equal to the real interest rate and inflation is positive.

Question 16

The Bureau of Labor Statistics would categorize a retiree who is not working as

Accepted Answer

A)  employed. 
B)  unemployed. 
C)  a discouraged worker. 
D)  out of the labor force. 
A)  employed. 
B)  unemployed. 
C)  a discouraged worker. 
D)  out of the labor force.

Question 17

The labor force participation rate is defined as

Accepted Answer

A)  the percentage of the working-age population that is employed. 
B)  the percentage of the working-age population that is unemployed. 
C)  the percentage of the labor force that is employed. 
D)  the percentage of the labor force that is unemployed. 
E)  the percentage of the working-age population in the labor force. 
A)  the percentage of the working-age population that is employed. 
B)  the percentage of the working-age population that is unemployed. 
C)  the percentage of the labor force that is employed. 
D)  the percentage of the labor force that is unemployed. 
E)  the percentage of the working-age population in the labor force.

Question 18

The U.S. unemployment insurance program

Accepted Answer

A)  increases the amount of time the unemployed spend searching for a job. 
B)  decreases the level of frictional unemployment. 
C)  pays the unemployed a benefit equal to twice the average wage. 
D)  eliminates structural unemployment. 
A)  increases the amount of time the unemployed spend searching for a job. 
B)  decreases the level of frictional unemployment. 
C)  pays the unemployed a benefit equal to twice the average wage. 
D)  eliminates structural unemployment.

Question 19

What impact would including members of the military in employment, labor force, and working-age population statistics have on the unemployment rate and the labor force participation rate?

Accepted Answer

A)  Including members of the military would increase the unemployment rate and reduce the labor force participation rate. 
B)  Including members of the military would reduce the unemployment rate and increase the labor force participation rate. 
C)  Including the military would increase both the unemployment rate and the labor force participation rate. 
D)  Including the military would reduce both the unemployment rate and the labor force participation rate. 
A)  Including members of the military would increase the unemployment rate and reduce the labor force participation rate. 
B)  Including members of the military would reduce the unemployment rate and increase the labor force participation rate. 
C)  Including the military would increase both the unemployment rate and the labor force participation rate. 
D)  Including the military would reduce both the unemployment rate and the labor force participation rate.

Question 20

What are menu costs?

Accepted Answer

A)  the full list of a firm's costs of production 
B)  the costs to a firm of changing prices 
C)  the cost to a household of borrowing money when there is deflation 
D)  the opportunity cost of dining in a restaurant instead of at home 
A)  the full list of a firm's costs of production 
B)  the costs to a firm of changing prices 
C)  the cost to a household of borrowing money when there is deflation 
D)  the opportunity cost of dining in a restaurant instead of at home

Exam 20: Unemployment and Inflation

Real interest rates at times have been negative. Why would anyone lending money agree to a negative real interest rate?

Suppose 180,000 people are employed, 20,000 people are unemployed, the working-age population is 250,000, and 50,000 people are not in the labor force. Calculate the unemployment rate.

Which of the following price indices comes closest to measuring the cost of living of the typical household?

Table 20-7 -Refer to Table 20-7. Suppose that the data in the table above reflect price levels in the economy. What is the inflation rate between 2017 and 2018?

In the United States, the typical person who has lost his or her job finds another one in a few months except during severe recessions.

The deflation of the 1930s impacted the U.S. economy because it led some consumers to ________ and because it ________.

The nominal interest rate equals the real interest rate ________ the inflation rate.

What are some reasons why the unemployment rate is typically lower in the United States as compared to Canada and some Western European countries?

Table 20-14 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. -Refer to Table 20-14. The real average hourly earnings for 1965 in 2010 dollars equal

If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level, we would base our measure of inflation on

By offering training to workers whose firms laid them off because of competition from foreign firms, the federal government is attempting to reduce

An increase in cyclical unemployment will result in

During the 1990s, Japan experienced periods of deflation and very low nominal interest rates, approaching zero percent. Why would lenders of money agree to a nominal interest rate of almost zero?

Figure 20-1 -Refer to Figure 20-1. Based on the graph of the labor market above, if a minimum wage is set at $5 per hour, which of the following will occur?

When deflation occurs

The Bureau of Labor Statistics would categorize a retiree who is not working as

The labor force participation rate is defined as

The U.S. unemployment insurance program

What impact would including members of the military in employment, labor force, and working-age population statistics have on the unemployment rate and the labor force participation rate?

What are menu costs?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

The deflation of the 1930s impacted the U.S. economy because it led some consumers to and because it .