Question 1

Hysteresis occurs because:

Accepted Answer

A)  people who are unemployed for a long period are lacking the skills needed to find new jobs. 
B)  people do not like to be employed at current conditions. 
C)  people prefer to receive unemployment benefits. 
D)  people who are unemployed for a long period demand more wages. 
A)  people who are unemployed for a long period are lacking the skills needed to find new jobs. 
B)  people do not like to be employed at current conditions. 
C)  people prefer to receive unemployment benefits. 
D)  people who are unemployed for a long period demand more wages.

Question 2

Consider a broom factory that permanently closes because of foreign competition. If the broom factory's workers cannot find new jobs because their skills are no longer marketable, then they are classified as:

Accepted Answer

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

Question 3

Suppose a market basket of goods and services costs $400 in the base year and the consumer price index (CPI) is currently 125. This indicates the price of the market basket of goods is now:

Accepted Answer

A)  $275. 
B)  $425. 
C)  $500. 
D)  $525. 
A)  $275. 
B)  $425. 
C)  $500. 
D)  $525.

Question 4

Which of the following formulas is correct?

Accepted Answer

A)  Cyclical unemployment + seasonal unemployment + structural unemployment = full employment. 
B)  Cyclical unemployment + structural unemployment + frictional unemployment = full employment. 
C)  Structural unemployment + seasonal unemployment + frictional unemployment = full employment. 
D)  Structural unemployment + frictional unemployment + cyclical unemployment = full employment. 
A)  Cyclical unemployment + seasonal unemployment + structural unemployment = full employment. 
B)  Cyclical unemployment + structural unemployment + frictional unemployment = full employment. 
C)  Structural unemployment + seasonal unemployment + frictional unemployment = full employment. 
D)  Structural unemployment + frictional unemployment + cyclical unemployment = full employment.

Question 5

Structural unemployment is unemployment caused by:

Accepted Answer

A)  temporary changes in jobs. 
B)  seasonal differences. 
C)  the time required to match employers and workers. 
D)  a mismatch between worker skills and employer requirements. 
A)  temporary changes in jobs. 
B)  seasonal differences. 
C)  the time required to match employers and workers. 
D)  a mismatch between worker skills and employer requirements.

Question 6

During the 1970s, the Organization of Petroleum Exporting Countries (OPEC) sharply increased the price of oil which triggered higher inflation rates in Australia. This type of inflation is best classified as:

Accepted Answer

A)  pseudo-inflation. 
B)  demand-pull inflation. 
C)  cost-push inflation. 
D)  hyperinflation. 
A)  pseudo-inflation. 
B)  demand-pull inflation. 
C)  cost-push inflation. 
D)  hyperinflation.

Question 7

Inflation in Australia since the early 1990s has been:

Accepted Answer

A)  higher than at any time since the 1960s. 
B)  more volatile than in the 1970s. 
C)  lower than at any time since the 1960s. 
D)  higher than it was in the 1980s. 
A)  higher than at any time since the 1960s. 
B)  more volatile than in the 1970s. 
C)  lower than at any time since the 1960s. 
D)  higher than it was in the 1980s.

Question 8

The costs of hyperinflation on an economy are:

Accepted Answer

A)  that people enjoy buying and reselling at higher prices. 
B)  that it can equate wealth between lenders and borrowers. 
C)  that it creates a vicious spending-price spiral. 
D)  that life insurance policies are jeopardised. 
A)  that people enjoy buying and reselling at higher prices. 
B)  that it can equate wealth between lenders and borrowers. 
C)  that it creates a vicious spending-price spiral. 
D)  that life insurance policies are jeopardised.

Question 9

Suppose the inflation rate is 10 per cent and that you deposit $10 000 in the bank that yields 8 per cent nominal interest rate. Your real interest rate is:

Accepted Answer

A)  0%. 
B)  2%. 
C)  -2%. 
D)  8%. 
A)  0%. 
B)  2%. 
C)  -2%. 
D)  8%.

Question 10

Unemployment is:

Accepted Answer

A)  only an economic problem because it represents a loss of potential output. 
B)  not a problem because people always find a job, eventually. 
C)  a big problem because it can reduce a person's self-respect. 
D)  not a problem because we have unemployment benefits as a safety net. 
A)  only an economic problem because it represents a loss of potential output. 
B)  not a problem because people always find a job, eventually. 
C)  a big problem because it can reduce a person's self-respect. 
D)  not a problem because we have unemployment benefits as a safety net.

Question 11

A person who has given up searching for work is called:

Accepted Answer

A)  frictionally unemployed. 
B)  structurally unemployed. 
C)  a discouraged worker. 
D)  unemployed. 
A)  frictionally unemployed. 
B)  structurally unemployed. 
C)  a discouraged worker. 
D)  unemployed.

Question 12

As the price of petrol rose during the 1970s, consumers cut back on their use of petrol relative to other consumer goods. This situation contributed to which bias in the consumer price index?

Accepted Answer

A)  Substitution bias. 
B)  Transportation bias. 
C)  Quality bias. 
D)  Indexing bias. 
A)  Substitution bias. 
B)  Transportation bias. 
C)  Quality bias. 
D)  Indexing bias.

Question 13

The problem with measuring inflation using the CPI is:

Accepted Answer

A)  that inflation may be understated for people who buy mainly goods and services whose prices are stable. 
B)  that inflation may be overstated for people who buy mainly goods and services whose prices are rising faster than the average. 
C)  that the CPI has difficulty in accounting for changes in the prices of goods and services. 
D)  that the CPI uses a fixed basket of goods and services, and so cannot allow for people substituting towards cheaper goods and services. 
A)  that inflation may be understated for people who buy mainly goods and services whose prices are stable. 
B)  that inflation may be overstated for people who buy mainly goods and services whose prices are rising faster than the average. 
C)  that the CPI has difficulty in accounting for changes in the prices of goods and services. 
D)  that the CPI uses a fixed basket of goods and services, and so cannot allow for people substituting towards cheaper goods and services.

Question 14

Hyperinflation can result in a shift in investment away from foreign currency and real estate.

Accepted Answer

A) True 
 B)False

Question 15

There are four types of unemployment:

Accepted Answer

A)  seasonal, frictional, structural and annual. 
B)  seasonal, fractional, structural and cyclical. 
C)  seasonal, frictional, discouraged and cyclical. 
D)  seasonal, frictional, structural and cyclical. 
A)  seasonal, frictional, structural and annual. 
B)  seasonal, fractional, structural and cyclical. 
C)  seasonal, frictional, discouraged and cyclical. 
D)  seasonal, frictional, structural and cyclical.

Question 16

A person pays cash for a house in 1990 for $200 000 and sells it in 2000 for $400 000. Over the same period the CPI has risen from its base index to 250. In terms of this asset, the purchasing power of this person:

Accepted Answer

A)  has increased. 
B)  has decreased. 
C)  has remained unchanged. 
D)  is indeterminate. 
A)  has increased. 
B)  has decreased. 
C)  has remained unchanged. 
D)  is indeterminate.

Question 17

Suppose you deposit $10 000 in a bank that yields a nominal interest rate of 8 per cent. If you expect inflation to be 6 per cent or lower, then you are expecting to earn a real interest rate of at least:

Accepted Answer

A)  1.6 per cent. 
B)  2 per cent. 
C)  4 per cent. 
D)  5 per cent. 
A)  1.6 per cent. 
B)  2 per cent. 
C)  4 per cent. 
D)  5 per cent.

Question 18

The lack of jobs due to the business cycle is called:

Accepted Answer

A)  frictional unemployment. 
B)  structural unemployment. 
C)  cost-push unemployment. 
D)  cyclical unemployment. 
A)  frictional unemployment. 
B)  structural unemployment. 
C)  cost-push unemployment. 
D)  cyclical unemployment.

Question 19

When inflation is relatively high and unstable, firms tend to invest more in _____ and less in _____.

Accepted Answer

A)  productive assets; real estate 
B)  shares; real estate 
C)  real estate; productive assets 
D)  real estate; consumption 
A)  productive assets; real estate 
B)  shares; real estate 
C)  real estate; productive assets 
D)  real estate; consumption

Question 20

Unemployment that occurs from fundamental technological changes in the production, or from the substitution of new goods for customary ones, is known as:

Accepted Answer

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

Hysteresis occurs because:

Consider a broom factory that permanently closes because of foreign competition. If the broom factory's workers cannot find new jobs because their skills are no longer marketable, then they are classified as:

Suppose a market basket of goods and services costs $400 in the base year and the consumer price index (CPI) is currently 125. This indicates the price of the market basket of goods is now:

Which of the following formulas is correct?

Structural unemployment is unemployment caused by:

During the 1970s, the Organization of Petroleum Exporting Countries (OPEC) sharply increased the price of oil which triggered higher inflation rates in Australia. This type of inflation is best classified as:

Inflation in Australia since the early 1990s has been:

The costs of hyperinflation on an economy are:

Suppose the inflation rate is 10 per cent and that you deposit $10 000 in the bank that yields 8 per cent nominal interest rate. Your real interest rate is:

Unemployment is:

A person who has given up searching for work is called:

As the price of petrol rose during the 1970s, consumers cut back on their use of petrol relative to other consumer goods. This situation contributed to which bias in the consumer price index?

The problem with measuring inflation using the CPI is:

Hyperinflation can result in a shift in investment away from foreign currency and real estate.

There are four types of unemployment:

A person pays cash for a house in 1990 for $200 000 and sells it in 2000 for $400 000. Over the same period the CPI has risen from its base index to 250. In terms of this asset, the purchasing power of this person:

Suppose you deposit $10 000 in a bank that yields a nominal interest rate of 8 per cent. If you expect inflation to be 6 per cent or lower, then you are expecting to earn a real interest rate of at least:

The lack of jobs due to the business cycle is called:

When inflation is relatively high and unstable, firms tend to invest more in _ and less in _.

Unemployment that occurs from fundamental technological changes in the production, or from the substitution of new goods for customary ones, is known as:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Exam 14: Inflation and Unemployment

Hysteresis occurs because:

Consider a broom factory that permanently closes because of foreign competition. If the broom factory's workers cannot find new jobs because their skills are no longer marketable, then they are classified as:

Suppose a market basket of goods and services costs $400 in the base year and the consumer price index (CPI) is currently 125. This indicates the price of the market basket of goods is now:

Which of the following formulas is correct?

Structural unemployment is unemployment caused by:

During the 1970s, the Organization of Petroleum Exporting Countries (OPEC) sharply increased the price of oil which triggered higher inflation rates in Australia. This type of inflation is best classified as:

Inflation in Australia since the early 1990s has been:

The costs of hyperinflation on an economy are:

Suppose the inflation rate is 10 per cent and that you deposit $10 000 in the bank that yields 8 per cent nominal interest rate. Your real interest rate is:

Unemployment is:

A person who has given up searching for work is called:

As the price of petrol rose during the 1970s, consumers cut back on their use of petrol relative to other consumer goods. This situation contributed to which bias in the consumer price index?

The problem with measuring inflation using the CPI is:

Hyperinflation can result in a shift in investment away from foreign currency and real estate.

There are four types of unemployment:

A person pays cash for a house in 1990 for $200 000 and sells it in 2000 for $400 000. Over the same period the CPI has risen from its base index to 250. In terms of this asset, the purchasing power of this person:

Suppose you deposit $10 000 in a bank that yields a nominal interest rate of 8 per cent. If you expect inflation to be 6 per cent or lower, then you are expecting to earn a real interest rate of at least:

The lack of jobs due to the business cycle is called:

When inflation is relatively high and unstable, firms tend to invest more in _____ and less in _____.

Unemployment that occurs from fundamental technological changes in the production, or from the substitution of new goods for customary ones, is known as:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

When inflation is relatively high and unstable, firms tend to invest more in _ and less in _.