Question 1

The cost to firms of changing prices

Accepted Answer

A)  is small even when there is rapid inflation. 
B)  is called a menu cost. 
C)  does not exist if inflation is perfectly anticipated. 
D)  all of the above 
A)  is small even when there is rapid inflation. 
B)  is called a menu cost. 
C)  does not exist if inflation is perfectly anticipated. 
D)  all of the above

Question 2

Efficiency wage is another name for the minimum wage.

Accepted Answer

A) True 
 B)False

Question 3

When the actual inflation rate turns out to be greater than the expected inflation rate,who gains -- the borrower or the lender -- and who loses? Explain why.

Accepted Answer

The borrower gains because he pays back

Question 4

The unemployment rate in the United States is typically lower than in Western Europe because the United States has tougher requirements for the unemployed to receive government payments.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following would decrease the unemployment rate?

Accepted Answer

A)  an increase in the minimum wage 
B)  an increase in the efficiency wage 
C)  an increase in labor union membership 
D)  government aid to retrain unemployed workers 
A)  an increase in the minimum wage 
B)  an increase in the efficiency wage 
C)  an increase in labor union membership 
D)  government aid to retrain unemployed workers

Question 6

The "new product bias" in the consumer price index refers to the idea that

Accepted Answer

A)  consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers. 
B)  consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers. 
C)  consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers. 
D)  new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers. 
A)  consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers. 
B)  consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers. 
C)  consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers. 
D)  new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.

Question 7

If the minimum wage is set above the market wage,

Accepted Answer

A)  the quantity of labor supplied will be below the quantity of labor demanded. 
B)  unemployment will rise. 
C)  highly-skilled workers will have a harder time finding jobs. 
D)  All of the above are correct. 
A)  the quantity of labor supplied will be below the quantity of labor demanded. 
B)  unemployment will rise. 
C)  highly-skilled workers will have a harder time finding jobs. 
D)  All of the above are correct.

Question 8

The natural rate of unemployment consists of frictional unemployment plus structural unemployment.

Accepted Answer

A) True 
 B)False

Question 9

Frictional 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 10

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 11

The GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

Accepted Answer

A)  inflation 
B)  discouraged workers 
C)  people employed in the underground economy 
D)  unemployed persons falsely report themselves to be actively looking for a job 
A)  inflation 
B)  discouraged workers 
C)  people employed in the underground economy 
D)  unemployed persons falsely report themselves to be actively looking for a job

Question 13

Table 20-8
   
The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 20-8.The real average hourly earnings for 1965 in 1982-1984 dollars equal

Accepted Answer

A)  $1.28. 
B)  $6.49. 
C)  $8.28. 
D)  $15.45. 
A)  $1.28. 
B)  $6.49. 
C)  $8.28. 
D)  $15.45.

Question 14

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students.This would cause

Accepted Answer

A)  the unemployment rate to decrease. 
B)  the labor force participation rate to decrease. 
C)  the number of discouraged workers to increase. 
D)  no change in the unemployment rate. 
A)  the unemployment rate to decrease. 
B)  the labor force participation rate to decrease. 
C)  the number of discouraged workers to increase. 
D)  no change in the unemployment rate.

Question 15

The average period of unemployment was ________ following the 2007-2009 recession as following any other recession since the end of World War II.

Accepted Answer

A)  three times as low 
B)  approximately the same 
C)  twice as high 
D)  eight times as high 
A)  three times as low 
B)  approximately the same 
C)  twice as high 
D)  eight times as high

Question 16

Most of the unemployment that occurred during the Great Depression was

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 17

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.

Accepted Answer

A) True 
 B)False

Question 18

The nominal interest rate equals the real interest rate ________ the inflation rate.

Accepted Answer

A)  times 
B)  divided by 
C)  plus 
D)  minus 
A)  times 
B)  divided by 
C)  plus 
D)  minus

Question 19

If the BLS counted persons that are on active military service in the totals for employment,the labor force,or the working-age population,this would

Accepted Answer

A)  decrease the measured unemployment rate. 
B)  decrease the measured labor force participation rate. 
C)  decrease the number of persons in the labor force. 
D)  decrease the number of persons in the working-age population. 
A)  decrease the measured unemployment rate. 
B)  decrease the measured labor force participation rate. 
C)  decrease the number of persons in the labor force. 
D)  decrease the number of persons in the working-age population.

Question 20

Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?

Accepted Answer

A)  A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year, and the actual rate of inflation ends up being 7 percent per year. 
B)  A worker receives a raise in salary that is less than the rate of inflation, because management under-predicted inflation. 
C)  Firms have to hire an extra worker to change prices in its store because of inflation. 
D)  A bank collects a lower amount of interest from a loan because inflation was under-predicted. 
A)  A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year, and the actual rate of inflation ends up being 7 percent per year. 
B)  A worker receives a raise in salary that is less than the rate of inflation, because management under-predicted inflation. 
C)  Firms have to hire an extra worker to change prices in its store because of inflation. 
D)  A bank collects a lower amount of interest from a loan because inflation was under-predicted.

Exam 20: Unemployment and Inflation

The cost to firms of changing prices

Efficiency wage is another name for the minimum wage.

When the actual inflation rate turns out to be greater than the expected inflation rate,who gains -- the borrower or the lender -- and who loses? Explain why.

The unemployment rate in the United States is typically lower than in Western Europe because the United States has tougher requirements for the unemployed to receive government payments.

Which of the following would decrease the unemployment rate?

The "new product bias" in the consumer price index refers to the idea that

If the minimum wage is set above the market wage,

The natural rate of unemployment consists of frictional unemployment plus structural unemployment.

Frictional unemployment is the result of

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 GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household.

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

Table 20-8 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. -Refer to Table 20-8.The real average hourly earnings for 1965 in 1982-1984 dollars equal

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students.This would cause

The average period of unemployment was ________ following the 2007-2009 recession as following any other recession since the end of World War II.

Most of the unemployment that occurred during the Great Depression was

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.

The nominal interest rate equals the real interest rate ________ the inflation rate.

If the BLS counted persons that are on active military service in the totals for employment,the labor force,or the working-age population,this would

Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?

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

Filters