Question 1

Table 7.1
  
-Refer to Table 7.1, which shows data for males and females over 16 years old in the island of Palma. What is the labor force participation rate?

Accepted Answer

A)  4.0 percent 
B)  10.0 percent 
C)  53.3 percent 
D)  7.4 percent 
E)  64.3 percent 
A)  4.0 percent 
B)  10.0 percent 
C)  53.3 percent 
D)  7.4 percent 
E)  64.3 percent

Question 2

The labor force consists of all adults who are currently employed.

Accepted Answer

A) True 
 B)False

Question 3

Suppose inflation is expected to be 5 percent next year, and you and your employer agree to a 6 percent increase in your nominal, or monetary, wage. If inflation turns out to be 5%, what is your real wage increase?

Accepted Answer

A)  1 percent 
B)  minus 1 percent 
C)  0 percent 
D)  minus 5 percent 
E)  6 percent 
A)  1 percent 
B)  minus 1 percent 
C)  0 percent 
D)  minus 5 percent 
E)  6 percent

Question 4

A reduction in the rate of inflation is called _____

Accepted Answer

A)  deflation. 
B)  inflation. 
C)  hyperinflation. 
D)  disinflation. 
E)  growth. 
A)  deflation. 
B)  inflation. 
C)  hyperinflation. 
D)  disinflation. 
E)  growth.

Question 5

Exhibit 7.1
  
-Refer to Exhibit 7.1, which shows the aggregate demand and aggregate supply curves of an economy. In the graph below, the rise in the price levels from P₁ to P₂ is a result of _____

Accepted Answer

A)  cost-pull inflation. 
B)  cost-push inflation. 
C)  demand-push inflation. 
D)  demand-pull inflation. 
E)  induced inflation. 
A)  cost-pull inflation. 
B)  cost-push inflation. 
C)  demand-push inflation. 
D)  demand-pull inflation. 
E)  induced inflation.

Question 6

If inflation is much higher than originally anticipated, _____ are better off and _____ are worse off.

Accepted Answer

A)  lenders who extended loans at fixed interest rates; people who borrowed at fixed interest rates 
B)  people who borrowed at fixed interest rates; banks that extended loans at fixed interest rates 
C)  retired people living on a fixed income; people who had borrowed fixed interest rate loans 
D)  people who deposited their savings at fixed interest rates; banks that accepted deposits at fixed interest rates 
E)  oil refiners who signed labor contracts agreeing to pay their workers the cost-of-living wage; workers who receive that cost-of-living wage 
A)  lenders who extended loans at fixed interest rates; people who borrowed at fixed interest rates 
B)  people who borrowed at fixed interest rates; banks that extended loans at fixed interest rates 
C)  retired people living on a fixed income; people who had borrowed fixed interest rate loans 
D)  people who deposited their savings at fixed interest rates; banks that accepted deposits at fixed interest rates 
E)  oil refiners who signed labor contracts agreeing to pay their workers the cost-of-living wage; workers who receive that cost-of-living wage

Question 7

The inflation experienced in the United States during the 1970s as a result of OPEC oil price increases is an example of _____

Accepted Answer

A)  demand-pull inflation. 
B)  hyperinflation. 
C)  cost-push inflation. 
D)  cyclical inflation. 
E)  disinflation. 
A)  demand-pull inflation. 
B)  hyperinflation. 
C)  cost-push inflation. 
D)  cyclical inflation. 
E)  disinflation.

Question 8

An increase in the interest rate, other things constant, will _____

Accepted Answer

A)  shift the supply of loanable funds curve to the left. 
B)  shift the supply of loanable funds curve to the right. 
C)  increase the quantity of loanable funds supplied. 
D)  shift the demand for loanable funds curve to the left. 
E)  increase the quantity of loanable funds demanded. 
A)  shift the supply of loanable funds curve to the left. 
B)  shift the supply of loanable funds curve to the right. 
C)  increase the quantity of loanable funds supplied. 
D)  shift the demand for loanable funds curve to the left. 
E)  increase the quantity of loanable funds demanded.

Question 9

Jacqueline has a Ph.D. in economics. She has turned down many job offers because she eventually hopes to teach at one of the top ten universities in her field. The type of unemployment she is experiencing is _____

Accepted Answer

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

Question 10

The unemployment rate does not reflect the true extent of the unemployment problem. Which of the following groups is not counted as unemployed in the official unemployment statistics?

Accepted Answer

A)  the underemployed and the cyclically unemployed 
B)  the underemployed and discouraged workers 
C)  discouraged workers and the frictionally unemployed 
D)  the frictionally unemployed and the structurally unemployed 
E)  the cyclically unemployed and the frictionally unemployed 
A)  the underemployed and the cyclically unemployed 
B)  the underemployed and discouraged workers 
C)  discouraged workers and the frictionally unemployed 
D)  the frictionally unemployed and the structurally unemployed 
E)  the cyclically unemployed and the frictionally unemployed

Question 11

Which of the following is likely to be an effect of inflation?

Accepted Answer

A)  an increase in the willingness of lenders to lend money for longer periods 
B)  a decrease in the willingness of borrowers to borrow money for longer periods 
C)  a decrease in the purchasing power of lenders in an economy 
D)  an increase in the willingness of people to buy bonds as a hedge against rising prices 
E)  an increase in the willingness of people to buy physical assets as a hedge against rising prices 
A)  an increase in the willingness of lenders to lend money for longer periods 
B)  a decrease in the willingness of borrowers to borrow money for longer periods 
C)  a decrease in the purchasing power of lenders in an economy 
D)  an increase in the willingness of people to buy bonds as a hedge against rising prices 
E)  an increase in the willingness of people to buy physical assets as a hedge against rising prices

Question 12

Inflation rates differ across regions mostly because of differences in _____

Accepted Answer

A)  the base year. 
B)  revisions to the data. 
C)  housing prices. 
D)  food costs. 
E)  prices for durable goods. 
A)  the base year. 
B)  revisions to the data. 
C)  housing prices. 
D)  food costs. 
E)  prices for durable goods.

Question 13

The unemployment rate measures the _____

Accepted Answer

A)  number of people in the labor force divided by the adult population. 
B)  percentage of people in the labor force who are unemployed. 
C)  percentage of people in an economy who have dropped out of the labor force. 
D)  number of people in the adult population who are looking for work. 
E)  number of people in the labor force who are not working. 
A)  number of people in the labor force divided by the adult population. 
B)  percentage of people in the labor force who are unemployed. 
C)  percentage of people in an economy who have dropped out of the labor force. 
D)  number of people in the adult population who are looking for work. 
E)  number of people in the labor force who are not working.

Question 14

What is the real interest rate if the nominal interest rate is 9 percent and the expected inflation rate is 4 percent?

Accepted Answer

A)  13 percent 
B)  −5 percent 
C)  9 percent 
D)  −13 percent 
E)  5 percent 
A)  13 percent 
B)  −5 percent 
C)  9 percent 
D)  −13 percent 
E)  5 percent

Question 15

Inmates from the county prison who are on work release are counted as part of the labor force.

Accepted Answer

A) True 
 B)False

Question 16

What is the real interest rate if the nominal interest rate is 7 percent and the expected inflation rate is -3 percent?

Accepted Answer

A)  0 percent 
B)  4 percent 
C)  -4 percent 
D)  10 percent 
E)  -3 percent 
A)  0 percent 
B)  4 percent 
C)  -4 percent 
D)  10 percent 
E)  -3 percent

Question 17

Which of the following events would most likely cause the nominal interest rate to fall?

Accepted Answer

A)  A decrease in the supply of loanable funds 
B)  An increase in the demand for loanable funds 
C)  An increase in the supply of loanable funds and an increase in the demand for loanable funds 
D)  An increase in the supply of loanable funds and a decrease in the demand for loanable funds 
E)  A decrease in the supply of loanable funds and an increase in the demand for loanable funds 
A)  A decrease in the supply of loanable funds 
B)  An increase in the demand for loanable funds 
C)  An increase in the supply of loanable funds and an increase in the demand for loanable funds 
D)  An increase in the supply of loanable funds and a decrease in the demand for loanable funds 
E)  A decrease in the supply of loanable funds and an increase in the demand for loanable funds

Question 18

Tony lent Dave $1,000 for one year with the understanding that Dave would repay $1,070. If the actual inflation rate was 7 percent, then the real rate of interest Tony received is _____.

Accepted Answer

A)  14 percent 
B)  7 percent 
C)  4 percent 
D)  0 percent 
E)  −7 percent 
A)  14 percent 
B)  7 percent 
C)  4 percent 
D)  0 percent 
E)  −7 percent

Question 19

Which of the following is not a cost of unemployment?

Accepted Answer

A)  a loss of income 
B)  emotional or psychological problems 
C)  the loss of job skills 
D)  a decrease in production 
E)  higher annual inflation rates 
A)  a loss of income 
B)  emotional or psychological problems 
C)  the loss of job skills 
D)  a decrease in production 
E)  higher annual inflation rates

Question 20

You would rather be a borrower when the _____

Accepted Answer

A)  interest rate is 10 percent and expected inflation is 2 percent. 
B)  interest rate is 5 percent and expected inflation is minus 2 percent. 
C)  interest rate is 9 percent and expected inflation is 7 percent. 
D)  interest rate is 8 percent and expected inflation is minus 3 percent. 
E)  interest rate is 12 percent and expected inflation is 5 percent. 
A)  interest rate is 10 percent and expected inflation is 2 percent. 
B)  interest rate is 5 percent and expected inflation is minus 2 percent. 
C)  interest rate is 9 percent and expected inflation is 7 percent. 
D)  interest rate is 8 percent and expected inflation is minus 3 percent. 
E)  interest rate is 12 percent and expected inflation is 5 percent.

Table 7.1 -Refer to Table 7.1, which shows data for males and females over 16 years old in the island of Palma. What is the labor force participation rate?

The labor force consists of all adults who are currently employed.

Suppose inflation is expected to be 5 percent next year, and you and your employer agree to a 6 percent increase in your nominal, or monetary, wage. If inflation turns out to be 5%, what is your real wage increase?

A reduction in the rate of inflation is called _____

Exhibit 7.1 -Refer to Exhibit 7.1, which shows the aggregate demand and aggregate supply curves of an economy. In the graph below, the rise in the price levels from P₁ to P₂ is a result of _____

If inflation is much higher than originally anticipated, _ are better off and _ are worse off.

The inflation experienced in the United States during the 1970s as a result of OPEC oil price increases is an example of _____

An increase in the interest rate, other things constant, will _____

Jacqueline has a Ph.D. in economics. She has turned down many job offers because she eventually hopes to teach at one of the top ten universities in her field. The type of unemployment she is experiencing is _____

The unemployment rate does not reflect the true extent of the unemployment problem. Which of the following groups is not counted as unemployed in the official unemployment statistics?

Which of the following is likely to be an effect of inflation?

Inflation rates differ across regions mostly because of differences in _____

The unemployment rate measures the _____

What is the real interest rate if the nominal interest rate is 9 percent and the expected inflation rate is 4 percent?

Inmates from the county prison who are on work release are counted as part of the labor force.

What is the real interest rate if the nominal interest rate is 7 percent and the expected inflation rate is -3 percent?

Which of the following events would most likely cause the nominal interest rate to fall?

Tony lent Dave $1,000 for one year with the understanding that Dave would repay $1,070. If the actual inflation rate was 7 percent, then the real rate of interest Tony received is _____.

Which of the following is not a cost of unemployment?

You would rather be a borrower when the _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 7: Unemployment and Inflation.

Table 7.1 -Refer to Table 7.1, which shows data for males and females over 16 years old in the island of Palma. What is the labor force participation rate?

The labor force consists of all adults who are currently employed.

Suppose inflation is expected to be 5 percent next year, and you and your employer agree to a 6 percent increase in your nominal, or monetary, wage. If inflation turns out to be 5%, what is your real wage increase?

A reduction in the rate of inflation is called _____

Exhibit 7.1 -Refer to Exhibit 7.1, which shows the aggregate demand and aggregate supply curves of an economy. In the graph below, the rise in the price levels from P₁ to P₂ is a result of _____

If inflation is much higher than originally anticipated, _____ are better off and _____ are worse off.

The inflation experienced in the United States during the 1970s as a result of OPEC oil price increases is an example of _____

An increase in the interest rate, other things constant, will _____

Jacqueline has a Ph.D. in economics. She has turned down many job offers because she eventually hopes to teach at one of the top ten universities in her field. The type of unemployment she is experiencing is _____

The unemployment rate does not reflect the true extent of the unemployment problem. Which of the following groups is not counted as unemployed in the official unemployment statistics?

Which of the following is likely to be an effect of inflation?

Inflation rates differ across regions mostly because of differences in _____

The unemployment rate measures the _____

What is the real interest rate if the nominal interest rate is 9 percent and the expected inflation rate is 4 percent?

Inmates from the county prison who are on work release are counted as part of the labor force.

What is the real interest rate if the nominal interest rate is 7 percent and the expected inflation rate is -3 percent?

Which of the following events would most likely cause the nominal interest rate to fall?

Tony lent Dave $1,000 for one year with the understanding that Dave would repay $1,070. If the actual inflation rate was 7 percent, then the real rate of interest Tony received is _____.

Which of the following is not a cost of unemployment?

You would rather be a borrower when the _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Federal Budgets and Public Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

If inflation is much higher than originally anticipated, _ are better off and _ are worse off.