Question 1

Housing is the largest component of the U.S.CPI market basket.

Accepted Answer

A) True 
 B)False

Question 2

The producer price index measures the prices that firms

Accepted Answer

A) pay for imported natural resources that go into the production process. 
B) receive for the goods and services they export. 
C) receive for the goods and services they use at all stages of production. 
D) pay for labor,whether or not the labor is foreign or domestic. 
A) pay for imported natural resources that go into the production process. 
B) receive for the goods and services they export. 
C) receive for the goods and services they use at all stages of production. 
D) pay for labor,whether or not the labor is foreign or domestic.

Question 3

Which of the following individuals would be most negatively affected by anticipated inflation?

Accepted Answer

A) a retired railroad engineer who receives a fixed income payment every month 
B) a union contractor whose pay is adjusted based on changes in the CPI 
C) a full-time employee at a pizza parlor who makes more than the minimum wage 
D) a student who borrows $10,000 at a nominal interest rate of 5% to finance educational expenses 
A) a retired railroad engineer who receives a fixed income payment every month 
B) a union contractor whose pay is adjusted based on changes in the CPI 
C) a full-time employee at a pizza parlor who makes more than the minimum wage 
D) a student who borrows $10,000 at a nominal interest rate of 5% to finance educational expenses

Question 4

Figure 9-1  
-Refer to Figure 9-1.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 5

Explain how the CPI is constructed.

Accepted Answer

The Bureau of Labor statistics surveys 1

Question 6

Jack just told his boss that he thinks his boss is an idiot.It is likely that Jack will be experiencing ________ unemployment in the near future.

Accepted Answer

A) permanent 
B) cyclical 
C) frictional 
D) structural 
A) permanent 
B) cyclical 
C) frictional 
D) structural

Question 7

The advice to "keep searching,there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment?

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 8

An advantage of the household survey over the establishment survey of the labor market is that the household survey

Accepted Answer

A) is based on actual payrolls,rather than on unverified answers. 
B) includes the number of self-employed persons. 
C) includes the number of discouraged workers. 
D) omits persons employed at newly opened firms. 
A) is based on actual payrolls,rather than on unverified answers. 
B) includes the number of self-employed persons. 
C) includes the number of discouraged workers. 
D) omits persons employed at newly opened firms.

Question 9

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

Accepted Answer

A) equaled $160 in 1996. 
B) equaled $160 in 1983. 
C) rose 160% from the cost of the market basket in the base year. 
D) rose 60% from the cost of the market basket in the base year. 
A) equaled $160 in 1996. 
B) equaled $160 in 1983. 
C) rose 160% from the cost of the market basket in the base year. 
D) rose 60% from the cost of the market basket in the base year.

Question 10

To obtain real average hourly earnings,nominal average hourly earnings are multiplied by the CPI.

Accepted Answer

A) True 
 B)False

Question 11

You agree to lend $1,000 for one year at a nominal interest rate of 10%.You anticipate that inflation will be 4% over that year.If inflation is instead 3% over that year,which of the following is true?

Accepted Answer

A) The real interest rate you earn on your money is lower than you expected. 
B) The purchasing power of the money that will be repaid to you will be lower than you expected. 
C) The person who borrowed the $1,000 will be worse off as a result of the unanticipated decrease in inflation. 
D) The real interest rate you earn on your money will be negative. 
A) The real interest rate you earn on your money is lower than you expected. 
B) The purchasing power of the money that will be repaid to you will be lower than you expected. 
C) The person who borrowed the $1,000 will be worse off as a result of the unanticipated decrease in inflation. 
D) The real interest rate you earn on your money will be negative.

Question 12

Structural unemployment is the result of

Accepted Answer

A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. 
B) the search process of matching workers with jobs. 
C) the ups and downs in inflation. 
D) a slowdown in the economy. 
A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. 
B) the search process of matching workers with jobs. 
C) the ups and downs in inflation. 
D) a slowdown in the economy.

Question 13

Table 9-1
   Consider the data above for a simple economy.
-Refer to Table 9-1.The unemployment rate for this simple economy equals

Accepted Answer

A) (100/1,000)× 100. 
B) (100/1,100)× 100. 
C) (100/15,000)× 100. 
D) (100/20,000)× 100. 
A) (100/1,000)× 100. 
B) (100/1,100)× 100. 
C) (100/15,000)× 100. 
D) (100/20,000)× 100.

Question 14

If an economy experiences deflation,the real interest rate

Accepted Answer

A) will be less than the nominal interest rate. 
B) will be negative when the nominal interest rate is positive. 
C) will be greater than the nominal interest rate. 
D) will be equal to the deflation rate,so long as the nominal interest rate is positive. 
A) will be less than the nominal interest rate. 
B) will be negative when the nominal interest rate is positive. 
C) will be greater than the nominal interest rate. 
D) will be equal to the deflation rate,so long as the nominal interest rate is positive.

Question 15

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

Accepted Answer

The substitution bias causes the CPI to

Question 16

The broadest measure of the price level that includes all final goods and services is

Accepted Answer

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

Question 17

List three different price indices and explain how they differ in terms of the market basket on which they are based.

Accepted Answer

Three examples of price indices are the

Question 18

The CPI in 1990 was 131,and the CPI in 2010 was 218.If you earned a salary of $40,000 in 1990,what would be a salary with equivalent purchasing power in 2010?

Accepted Answer

A) $45,977 
B) $66,565 
C) $87,200 
D) $143,486 
A) $45,977 
B) $66,565 
C) $87,200 
D) $143,486

Question 19

Most economists believe that labor unions significantly increase the overall unemployment rate in the United States.

Accepted Answer

A) True 
 B)False

Question 20

Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest.If the inflation rate was 4%,what was the real interest rate you paid?

Accepted Answer

A) 16 percent 
B) 12 percent 
C) 8 percent 
D) 6 percent 
A) 16 percent 
B) 12 percent 
C) 8 percent 
D) 6 percent

Housing is the largest component of the U.S.CPI market basket.

The producer price index measures the prices that firms

Which of the following individuals would be most negatively affected by anticipated inflation?

Figure 9-1 -Refer to Figure 9-1.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?

Explain how the CPI is constructed.

Jack just told his boss that he thinks his boss is an idiot.It is likely that Jack will be experiencing ________ unemployment in the near future.

The advice to "keep searching,there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment?

An advantage of the household survey over the establishment survey of the labor market is that the household survey

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

To obtain real average hourly earnings,nominal average hourly earnings are multiplied by the CPI.

You agree to lend $1,000 for one year at a nominal interest rate of 10%.You anticipate that inflation will be 4% over that year.If inflation is instead 3% over that year,which of the following is true?

Structural unemployment is the result of

Table 9-1 Consider the data above for a simple economy. -Refer to Table 9-1.The unemployment rate for this simple economy equals

If an economy experiences deflation,the real interest rate

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

The broadest measure of the price level that includes all final goods and services is

List three different price indices and explain how they differ in terms of the market basket on which they are based.

The CPI in 1990 was 131,and the CPI in 2010 was 218.If you earned a salary of $40,000 in 1990,what would be a salary with equivalent purchasing power in 2010?

Most economists believe that labor unions significantly increase the overall unemployment rate in the United States.

Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest.If the inflation rate was 4%,what was the real interest rate you paid?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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

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Exam 9: Unemployment and Inflation

Housing is the largest component of the U.S.CPI market basket.

The producer price index measures the prices that firms

Which of the following individuals would be most negatively affected by anticipated inflation?

Figure 9-1 -Refer to Figure 9-1.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?

Explain how the CPI is constructed.

Jack just told his boss that he thinks his boss is an idiot.It is likely that Jack will be experiencing ________ unemployment in the near future.

The advice to "keep searching,there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment?

An advantage of the household survey over the establishment survey of the labor market is that the household survey

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

To obtain real average hourly earnings,nominal average hourly earnings are multiplied by the CPI.

You agree to lend $1,000 for one year at a nominal interest rate of 10%.You anticipate that inflation will be 4% over that year.If inflation is instead 3% over that year,which of the following is true?

Structural unemployment is the result of

Table 9-1 Consider the data above for a simple economy. -Refer to Table 9-1.The unemployment rate for this simple economy equals

If an economy experiences deflation,the real interest rate

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

The broadest measure of the price level that includes all final goods and services is

List three different price indices and explain how they differ in terms of the market basket on which they are based.

The CPI in 1990 was 131,and the CPI in 2010 was 218.If you earned a salary of $40,000 in 1990,what would be a salary with equivalent purchasing power in 2010?

Most economists believe that labor unions significantly increase the overall unemployment rate in the United States.

Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest.If the inflation rate was 4%,what was the real interest rate you paid?

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

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

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