Question 1

Which of the following groups are typically harmed by unexpected inflation?

Accepted Answer

A)  lenders 
B)  borrowers 
C)  pensioners on fixed incomes 
D)  both (a) and (c). 
A)  lenders 
B)  borrowers 
C)  pensioners on fixed incomes 
D)  both (a) and (c).

Question 2

What would happen to the real interest rate if originally the nominal interest rate was 14% and the inflation rate was 10%,then the nominal interest rate fell to 7% as the inflation rate fell to 4%? It would go from:

Accepted Answer

A)  24% to 11%. 
B)  11% to 24%. 
C)  4% to 3%. 
D)  3% to 4%. 
A)  24% to 11%. 
B)  11% to 24%. 
C)  4% to 3%. 
D)  3% to 4%.

Question 3

In the typical CPI shopping basket,which of the categories below represents the largest percentage of consumer spending?

Accepted Answer

A)  housing 
B)  food & beverages 
C)  transportation 
D)  medical care 
A)  housing 
B)  food & beverages 
C)  transportation 
D)  medical care

Question 4

According to Okun's law,a 2 percent increase in cyclical unemployment reduces output by roughly:

Accepted Answer

A)  1 percent. 
B)  2 percent. 
C)  0.5 percent 
D)  4 percent. 
A)  1 percent. 
B)  2 percent. 
C)  0.5 percent 
D)  4 percent.

Question 5

Discouraged workers are defined as those:

Accepted Answer

A)  whose productivity is low because working in dead-end jobs reduces their morale. 
B)  who are counted as frictionally unemployed, having become dissatisfied with their previous jobs. 
C)  who are counted as structurally unemployed, lacking training for the skilled positions for which they are applying. 
D)  who have given up looking for a job and are not counted as unemployed. 
A)  whose productivity is low because working in dead-end jobs reduces their morale. 
B)  who are counted as frictionally unemployed, having become dissatisfied with their previous jobs. 
C)  who are counted as structurally unemployed, lacking training for the skilled positions for which they are applying. 
D)  who have given up looking for a job and are not counted as unemployed.

Question 6

Which of the following people is most likely to be structurally unemployed?

Accepted Answer

A)  Brendan left his job as a short-order cook in New Jersey to become a short-order cook in Madrid, New Mexico. He was unemployed for six weeks during the transition. 
B)  Mildred quit her job after giving birth to a child. 
C)  Clem, a skilled corset maker, lost his job when his factory shut down due to a permanent reduction in the demand for corsets. 
D)  Danielle lost her job when the electronics assembly plant was shut down temporarily due to low product sales in a slumping economy. 
A)  Brendan left his job as a short-order cook in New Jersey to become a short-order cook in Madrid, New Mexico. He was unemployed for six weeks during the transition. 
B)  Mildred quit her job after giving birth to a child. 
C)  Clem, a skilled corset maker, lost his job when his factory shut down due to a permanent reduction in the demand for corsets. 
D)  Danielle lost her job when the electronics assembly plant was shut down temporarily due to low product sales in a slumping economy.

Question 7

Since 1950,there has been ____ in the labor force participation rate.

Accepted Answer

A)  no change 
B)  an increase 
C)  a decrease 
D)  first an increase and then a significant decrease 
A)  no change 
B)  an increase 
C)  a decrease 
D)  first an increase and then a significant decrease

Question 8

An individual who voluntarily leaves one job and spends a period of time seeking another is considered:

Accepted Answer

A)  frictionally unemployed. 
B)  cyclically unemployed. 
C)  structurally unemployed. 
D)  seasonally unemployed. 
A)  frictionally unemployed. 
B)  cyclically unemployed. 
C)  structurally unemployed. 
D)  seasonally unemployed.

Question 9

Which of the following is false?

Accepted Answer

A)  The most well known price index is the consumer price index, which provides a measure of the trend in the prices of goods and services purchased for consumption purposes. 
B)  The GDP deflator measures the average level of prices of all final goods and services produced in the economy. 
C)  The CPI is the price index that is most relevant to households trying to evaluate their changing financial position over time. 
D)  A price index is equal to the cost of the chosen market basket in the base year, divided by the cost of the same market basket in the current year, times 100. 
A)  The most well known price index is the consumer price index, which provides a measure of the trend in the prices of goods and services purchased for consumption purposes. 
B)  The GDP deflator measures the average level of prices of all final goods and services produced in the economy. 
C)  The CPI is the price index that is most relevant to households trying to evaluate their changing financial position over time. 
D)  A price index is equal to the cost of the chosen market basket in the base year, divided by the cost of the same market basket in the current year, times 100.

Question 10

The current cost of a market basket of goods is $800.The cost of the same basket of goods in the base year was $1,000.The current price index is:

Accepted Answer

A)  120. 
B)  100. 
C)  80. 
D)  -20. 
A)  120. 
B)  100. 
C)  80. 
D)  -20.

Question 11

The unemployment rate may underestimate the true extent of unemployment if:

Accepted Answer

A)  many part-time employees would like to work full-time, but are unable to get the additional work. 
B)  employees increase the number of hours they work overtime. 
C)  there are a large number of people working in the underground economy. 
D)  any of the above occur. 
A)  many part-time employees would like to work full-time, but are unable to get the additional work. 
B)  employees increase the number of hours they work overtime. 
C)  there are a large number of people working in the underground economy. 
D)  any of the above occur.

Question 12

Economists use the term "business cycle" to refer to:

Accepted Answer

A)  the growth of small businesses into major corporations. 
B)  qualitative changes in products resulting from improved technology. 
C)  fluctuations in economic activity, measured by GDP or unemployment. 
D)  periods of increase or decrease in the rate of inflation. 
A)  the growth of small businesses into major corporations. 
B)  qualitative changes in products resulting from improved technology. 
C)  fluctuations in economic activity, measured by GDP or unemployment. 
D)  periods of increase or decrease in the rate of inflation.

Question 13

Which of the following statements is incorrect?

Accepted Answer

A)  Demand and supply curves for labor are constantly shifting. 
B)  The typical unemployment compensation in the United States is one's full salary for up to 26 weeks. 
C)  Unemployment compensation decreases the opportunity cost of being unemployed to a worker. 
D)  Unemployment compensation encourages longer job searches, which may lead to a better match between jobs and employees. 
A)  Demand and supply curves for labor are constantly shifting. 
B)  The typical unemployment compensation in the United States is one's full salary for up to 26 weeks. 
C)  Unemployment compensation decreases the opportunity cost of being unemployed to a worker. 
D)  Unemployment compensation encourages longer job searches, which may lead to a better match between jobs and employees.

Question 14

Economists usually use the term "recession" to refer to:

Accepted Answer

A)  any slowdown in the growth of real GDP. 
B)  zero real GDP growth. 
C)  two or more consecutive quarters of declining real GDP. 
D)  a reduction in nominal GDP lasting more than six months. 
A)  any slowdown in the growth of real GDP. 
B)  zero real GDP growth. 
C)  two or more consecutive quarters of declining real GDP. 
D)  a reduction in nominal GDP lasting more than six months.

Question 15

Which of the following is not a leading economic indicator?

Accepted Answer

A)  Prices of common stock 
B)  Number of new businesses formed 
C)  Unemployment rate 
D)  New orders for plants and equipment 
A)  Prices of common stock 
B)  Number of new businesses formed 
C)  Unemployment rate 
D)  New orders for plants and equipment

Question 16

The index of leading economic indicators usually turns downward:

Accepted Answer

A)  prior to economic expansions. 
B)  prior to economic contractions. 
C)  prior to a contraction, but then turns upward before the contraction begins. 
D)  a full 24 months before a recession begins. 
A)  prior to economic expansions. 
B)  prior to economic contractions. 
C)  prior to a contraction, but then turns upward before the contraction begins. 
D)  a full 24 months before a recession begins.

Question 17

The natural rate of unemployment can change over time as technological,demographic,institutional,and other conditions vary.

Accepted Answer

A) True 
 B)False

Question 18

Persons who do not hold a job,but are actively seeking work are considered:

Accepted Answer

A)  out of the labor force. 
B)  unemployed. 
C)  unemployable, and not counted in official statistics. 
D)  underemployed. 
A)  out of the labor force. 
B)  unemployed. 
C)  unemployable, and not counted in official statistics. 
D)  underemployed.

Question 19

Which of the following statements is correct?

Accepted Answer

A)  If unions successfully bargain for higher wages for their union members, employment among union members will increase. 
B)  Wages are higher in nonunion jobs than in union jobs of comparable skill. 
C)  The efficiency wage model asserts that higher wages will lead to higher productivity. 
D)  The imposition of a minimum wage above the market price for unskilled labor creates a shortage of labor. 
A)  If unions successfully bargain for higher wages for their union members, employment among union members will increase. 
B)  Wages are higher in nonunion jobs than in union jobs of comparable skill. 
C)  The efficiency wage model asserts that higher wages will lead to higher productivity. 
D)  The imposition of a minimum wage above the market price for unskilled labor creates a shortage of labor.

Question 20

Unemployment caused by a contraction in the economy is called:

Accepted Answer

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

Exam 18: Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Which of the following groups are typically harmed by unexpected inflation?

What would happen to the real interest rate if originally the nominal interest rate was 14% and the inflation rate was 10%,then the nominal interest rate fell to 7% as the inflation rate fell to 4%? It would go from:

In the typical CPI shopping basket,which of the categories below represents the largest percentage of consumer spending?

According to Okun's law,a 2 percent increase in cyclical unemployment reduces output by roughly:

Discouraged workers are defined as those:

Which of the following people is most likely to be structurally unemployed?

Since 1950,there has been ____ in the labor force participation rate.

An individual who voluntarily leaves one job and spends a period of time seeking another is considered:

Which of the following is false?

The current cost of a market basket of goods is $800.The cost of the same basket of goods in the base year was $1,000.The current price index is:

The unemployment rate may underestimate the true extent of unemployment if:

Economists use the term "business cycle" to refer to:

Which of the following statements is incorrect?

Economists usually use the term "recession" to refer to:

Which of the following is not a leading economic indicator?

The index of leading economic indicators usually turns downward:

The natural rate of unemployment can change over time as technological,demographic,institutional,and other conditions vary.

Persons who do not hold a job,but are actively seeking work are considered:

Which of the following statements is correct?

Unemployment caused by a contraction in the economy is called:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

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