Question 1

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 2

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 3

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

Accepted Answer

A)  employed. 
B)  unemployed. 
C)  not in the labor force. 
D)  not in the working-age population. 
A)  employed. 
B)  unemployed. 
C)  not in the labor force. 
D)  not in the working-age population.

Question 4

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 5

Table 20-1
  
 Consider the data above for a simple economy.
-Refer to Table 20-1.The labor force participation rate for this simple economy equals

Accepted Answer

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

Question 6

Currently,the base year for the CPI is the average of prices in the years 1982 to 1984.

Accepted Answer

A) True 
 B)False

Question 7

The unemployment rate is an important economic statistic that can tell us about the health of the economy.If the unemployment rate turns out to be high or higher than anticipated,we would expect

Accepted Answer

A)  it is more likely that an incumbent president will be re-elected. 
B)  that stock prices are more likely to fall. 
C)  that jobs are less difficult to find. 
D)  that investors will be more optimistic about the economy. 
A)  it is more likely that an incumbent president will be re-elected. 
B)  that stock prices are more likely to fall. 
C)  that jobs are less difficult to find. 
D)  that investors will be more optimistic about the economy.

Question 8

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest.If the inflation rate was 7%,what was the real interest rate you paid?

Accepted Answer

A)  17 percent 
B)  10 percent 
C)  7 percent 
D)  3 percent 
A)  17 percent 
B)  10 percent 
C)  7 percent 
D)  3 percent

Question 9

The advice to "retrain" would be most appropriate for which of the following types of unemployment?

Accepted Answer

A)  frictional unemployment 
B)  structural unemployment 
C)  cyclical unemployment 
D)  core unemployment 
A)  frictional unemployment 
B)  structural unemployment 
C)  cyclical unemployment 
D)  core unemployment

Question 10

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 11

Suppose you borrow $1,000 at an interest rate of 12 percent.If the expected real interest rate is 5 percent,then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation

Accepted Answer

A)  equal to 0 percent. 
B)  greater than 7 percent. 
C)  equal to 7 percent. 
D)  less than 7 percent. 
A)  equal to 0 percent. 
B)  greater than 7 percent. 
C)  equal to 7 percent. 
D)  less than 7 percent.

Question 12

Cyclical 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

The Bureau of Labor Statistics has taken several steps to reduce the bias in the consumer price index.Which of the following is not one of the steps taken to reduce the bias?

Accepted Answer

A)  using statistical methods to reduce the size of the quality bias 
B)  updating the market basket every two years, rather than every 10 years 
C)  incorporating substitutions by consumers when prices of specific products rise rapidly 
D)  conducting a point-of-purchase survey to track where consumers actually make their purchases 
A)  using statistical methods to reduce the size of the quality bias 
B)  updating the market basket every two years, rather than every 10 years 
C)  incorporating substitutions by consumers when prices of specific products rise rapidly 
D)  conducting a point-of-purchase survey to track where consumers actually make their purchases

Question 14

The increased generosity of unemployment insurance programs in Canada as compared to the United States should

Accepted Answer

A)  decrease the duration of unemployment in Canada as compared to the United States. 
B)  increase the duration of unemployment in Canada as compared to the United States. 
C)  have no impact on the duration of unemployment in Canada. 
D)  raise the duration of unemployment in the United States. 
A)  decrease the duration of unemployment in Canada as compared to the United States. 
B)  increase the duration of unemployment in Canada as compared to the United States. 
C)  have no impact on the duration of unemployment in Canada. 
D)  raise the duration of unemployment in the United States.

Question 15

Suppose that in 2012,all prices in the economy double and that all wages and salaries have also doubled.In 2012 you

Accepted Answer

A)  are worse off than you were in 2011 as you can no longer afford to buy as many goods and services. 
B)  are better off than you were in 2011 as your salary is higher than it was in 2011 and you can now buy more goods and services. 
C)  are no better off or worse off than you were in 2011 as the purchasing power of your salary has remained the same. 
D)  cannot determine whether you are better off or worse off than you were in 2011, because the purchasing power of your salary cannot be determined. 
A)  are worse off than you were in 2011 as you can no longer afford to buy as many goods and services. 
B)  are better off than you were in 2011 as your salary is higher than it was in 2011 and you can now buy more goods and services. 
C)  are no better off or worse off than you were in 2011 as the purchasing power of your salary has remained the same. 
D)  cannot determine whether you are better off or worse off than you were in 2011, because the purchasing power of your salary cannot be determined.

Question 16

Which of the following would increase the unemployment rate?

Accepted Answer

A)  a law making it illegal to work more than 35 hours per week 
B)  a cut in unemployment compensation 
C)  an increase in unemployment insurance payments 
D)  a decrease in the minimum wage 
A)  a law making it illegal to work more than 35 hours per week 
B)  a cut in unemployment compensation 
C)  an increase in unemployment insurance payments 
D)  a decrease in the minimum wage

Question 17

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 18

In the modern U.S.economy,the typical unemployed person stays unemployed for

Accepted Answer

A)  a relatively long time, over a year. 
B)  a relatively short time, less than six months. 
C)  for a long time during expansions and short time during recessions. 
D)  an amount of time that is hard to quantify. 
A)  a relatively long time, over a year. 
B)  a relatively short time, less than six months. 
C)  for a long time during expansions and short time during recessions. 
D)  an amount of time that is hard to quantify.

Question 19

A lumberjack loses his job because timber cutting restrictions were imposed by the EPA to protect the spotted owl habitat.This lumberjack would be

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 20

The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.

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

Exam 20: Unemployment and Inflation

If an economy experiences deflation,the real interest rate

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

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

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 20-1 Consider the data above for a simple economy. -Refer to Table 20-1.The labor force participation rate for this simple economy equals

Currently,the base year for the CPI is the average of prices in the years 1982 to 1984.

The unemployment rate is an important economic statistic that can tell us about the health of the economy.If the unemployment rate turns out to be high or higher than anticipated,we would expect

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest.If the inflation rate was 7%,what was the real interest rate you paid?

The advice to "retrain" would be most appropriate for which of the following types of unemployment?

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

Suppose you borrow $1,000 at an interest rate of 12 percent.If the expected real interest rate is 5 percent,then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation

Cyclical unemployment is the result of

The Bureau of Labor Statistics has taken several steps to reduce the bias in the consumer price index.Which of the following is not one of the steps taken to reduce the bias?

The increased generosity of unemployment insurance programs in Canada as compared to the United States should

Suppose that in 2012,all prices in the economy double and that all wages and salaries have also doubled.In 2012 you

Which of the following would increase the unemployment rate?

The producer price index measures the prices that firms

In the modern U.S.economy,the typical unemployed person stays unemployed for

A lumberjack loses his job because timber cutting restrictions were imposed by the EPA to protect the spotted owl habitat.This lumberjack would be

The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.

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

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