Question 1

Unanticipated inflation creates problems for society because

Accepted Answer

A) it increases the wealth of people who hold cash 
B) it promotes social cooperation by encouraging self-restraint 
C) it reduces the desire to plan and reduces the complexity of planning 
D) it redistributes wealth and income 
E) it requires buyers to spend less time acquiring information about prices 
A) it increases the wealth of people who hold cash 
B) it promotes social cooperation by encouraging self-restraint 
C) it reduces the desire to plan and reduces the complexity of planning 
D) it redistributes wealth and income 
E) it requires buyers to spend less time acquiring information about prices D

Question 2

Juanita earned a B.S.in engineering and went to work for a defense contractor.When the government cut spending,Juanita and 99 others were laid off.The only other business in the town is growing grapes,but the growers refuse to hire laid-off engineers,knowing they will leave at the first opportunity.The unemployment Juanita is experiencing is

Accepted Answer

A) cyclical 
B) structural 
C) seasonal 
D) frictional 
E) voluntary 
A) cyclical 
B) structural 
C) seasonal 
D) frictional 
E) voluntary B

Question 3

Exhibit 7-1  
-In Exhibit 7-1 the economy is initially facing AD0 and AS0.Which of the following best describes the occurance of demand-pull inflation?

Accepted Answer

A) The aggregate demand curve shifts to AD1. 
B) The agregate supply curve shifts to AS1. 
C) The aggregate demand curve shifts to AD1 and the aggregate supply curve shifts to AS1. 
D) The aggregate demand curve shifts to AD2. 
E) The aggregate supply curve shifts to AS2. 
A) The aggregate demand curve shifts to AD1. 
B) The agregate supply curve shifts to AS1. 
C) The aggregate demand curve shifts to AD1 and the aggregate supply curve shifts to AS1. 
D) The aggregate demand curve shifts to AD2. 
E) The aggregate supply curve shifts to AS2. A

Question 4

In periods of high inflation,

Accepted Answer

A) people want to hold as much money as possible 
B) the purchasing power of money is increasing 
C) nobody wants to work and earn income 
D) high nominal interest rates are likely to result 
E) nobody wants to buy goods 
A) people want to hold as much money as possible 
B) the purchasing power of money is increasing 
C) nobody wants to work and earn income 
D) high nominal interest rates are likely to result 
E) nobody wants to buy goods

Question 5

Unanticipated inflation generally hurts borrowers and benefits lenders.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following will most likely qualify for unemployment compensation benefits?

Accepted Answer

A) a new college graduate who cannot find work despite a desperate job search 
B) an unemployed coal miner who has been receiving benefits for the past six months 
C) a former retail clerk who quit her job because the boss was too demanding 
D) a spot welder who has just gotten his first "pink slip" in the mail after ten years of continuous employment 
E) an accountant who was fired from his last position for drinking alcohol on the job 
A) a new college graduate who cannot find work despite a desperate job search 
B) an unemployed coal miner who has been receiving benefits for the past six months 
C) a former retail clerk who quit her job because the boss was too demanding 
D) a spot welder who has just gotten his first "pink slip" in the mail after ten years of continuous employment 
E) an accountant who was fired from his last position for drinking alcohol on the job

Question 7

If two parties to a loan contract agree that the lender should earn an 8 percent increase in purchasing power as a result of a loan,and the inflation rate is 5 percent,what is the nominal interest rate?

Accepted Answer

A) 13 percent 
B) 8 percent 
C) 5 percent 
D) 3 percent 
E) 1 percent 
A) 13 percent 
B) 8 percent 
C) 5 percent 
D) 3 percent 
E) 1 percent

Question 8

The unemployment rate rises any time there is an increase in the number of unemployed.

Accepted Answer

A) True 
 B)False

Question 9

An individual with a Ph.D.in physics,who can find employment only in a pizza parlor,would be considered as

Accepted Answer

A) a discouraged worker 
B) underemployed 
C) overemployed 
D) unemployed 
E) not in the labor force 
A) a discouraged worker 
B) underemployed 
C) overemployed 
D) unemployed 
E) not in the labor force

Question 10

Which of the following is most likely to reduce structural unemployment?

Accepted Answer

A) a reduction in wage rates 
B) increasing efficiency of the job search through better information on local job openings 
C) retraining workers in marketable skills 
D) promotion of full employment through government stabilization policies 
E) reducing the cost of job loss through enhanced unemployment compensation 
A) a reduction in wage rates 
B) increasing efficiency of the job search through better information on local job openings 
C) retraining workers in marketable skills 
D) promotion of full employment through government stabilization policies 
E) reducing the cost of job loss through enhanced unemployment compensation

Question 11

During periods of inflation,the real value (purchasing power)of a given amount of nominal dollars decreases.

Accepted Answer

A) True 
 B)False

Question 12

Consider an economy with an adult population of 100,50 of whom hold jobs,10 of whom are looking for work,and 15 of whom are retired.The labor force participation rate is

Accepted Answer

A) 100 percent 
B) 60 percent 
C) 50 percent 
D) 40 percent 
E) 10 percent 
A) 100 percent 
B) 60 percent 
C) 50 percent 
D) 40 percent 
E) 10 percent

Question 13

If top government officials claim that "more people are working now than ever before," which of the following must be true?

Accepted Answer

A) The unemployment rate is lower now than ever before. 
B) The number of people unemployed is lower now than ever before. 
C) The employment rate is higher now than ever before. 
D) The number of people in the labor force is higher now than ever before. 
E) The number of people employed is higher now than ever before. 
A) The unemployment rate is lower now than ever before. 
B) The number of people unemployed is lower now than ever before. 
C) The employment rate is higher now than ever before. 
D) The number of people in the labor force is higher now than ever before. 
E) The number of people employed is higher now than ever before.

Question 14

Suppose you received a 5 percent increase in your nominal wage.Over the year,inflation ran about 2 percent.Which of the following is true?

Accepted Answer

A) Your real wage increased. 
B) Your nominal wage decreased. 
C) Both your nominal and real wages decreased. 
D) Although your nominal wage fell,your real wage increased. 
E) Although your nominal wage rose,your real wage decreased. 
A) Your real wage increased. 
B) Your nominal wage decreased. 
C) Both your nominal and real wages decreased. 
D) Although your nominal wage fell,your real wage increased. 
E) Although your nominal wage rose,your real wage decreased.

Question 15

Which of the following people would be classified as unemployed?

Accepted Answer

A) a person who wants a job as a fashion model but cannot find work in that field 
B) someone who quits a part-time job to attend school full-time 
C) someone who gives up looking for a job 
D) a person who works at a job that underemploys his or her skills 
E) a person who works part-time and would rather work full-time 
A) a person who wants a job as a fashion model but cannot find work in that field 
B) someone who quits a part-time job to attend school full-time 
C) someone who gives up looking for a job 
D) a person who works at a job that underemploys his or her skills 
E) a person who works part-time and would rather work full-time

Question 16

Which of the following would lead to the most inflation?

Accepted Answer

A) Both aggregate demand and aggregate supply increase. 
B) Both aggregate demand and aggregate supply decrease. 
C) Aggregate demand increases and aggregate supply decreases. 
D) Aggregate demand increases and aggregate supply increases. 
E) Aggregate supply decreases. 
A) Both aggregate demand and aggregate supply increase. 
B) Both aggregate demand and aggregate supply decrease. 
C) Aggregate demand increases and aggregate supply decreases. 
D) Aggregate demand increases and aggregate supply increases. 
E) Aggregate supply decreases.

Question 17

An increase in the demand for loanable funds,other things constant,will increase the interest rate.

Accepted Answer

A) True 
 B)False

Question 18

Unanticipated inflation is usually viewed as undesirable because it

Accepted Answer

A) reduces everyone's nominal wages 
B) redistributes income and wealth 
C) is accompanied by reductions in real GDP 
D) usually results in the public sector growing less rapidly than the private sector 
E) lets lenders gain at the expense of borrowers 
A) reduces everyone's nominal wages 
B) redistributes income and wealth 
C) is accompanied by reductions in real GDP 
D) usually results in the public sector growing less rapidly than the private sector 
E) lets lenders gain at the expense of borrowers

Question 19

A recent college graduate who is still looking for their first job,would be considered as

Accepted Answer

A) a discouraged worker 
B) underemployed 
C) overemployed 
D) unemployed 
E) not in the labor force 
A) a discouraged worker 
B) underemployed 
C) overemployed 
D) unemployed 
E) not in the labor force

Question 20

Which of the following is not an effect of hyperinflation?

Accepted Answer

A) Price differences among sellers of the same product become larger. 
B) People hold on to currency only for very short periods of time. 
C) People tend to exchange the currency that is subject to high inflation for a more stable currency. 
D) More resources are used efficiently to overcome inflation's effects on transactions costs. 
E) Inflation-induced activity that is rational for individuals often has a detrimental effect on the economy as a whole. 
A) Price differences among sellers of the same product become larger. 
B) People hold on to currency only for very short periods of time. 
C) People tend to exchange the currency that is subject to high inflation for a more stable currency. 
D) More resources are used efficiently to overcome inflation's effects on transactions costs. 
E) Inflation-induced activity that is rational for individuals often has a detrimental effect on the economy as a whole.

Exam 7: Unemployment and Inflation

Unanticipated inflation creates problems for society because

Exhibit 7-1 -In Exhibit 7-1 the economy is initially facing AD0 and AS0.Which of the following best describes the occurance of demand-pull inflation?

In periods of high inflation,

Unanticipated inflation generally hurts borrowers and benefits lenders.

Which of the following will most likely qualify for unemployment compensation benefits?

If two parties to a loan contract agree that the lender should earn an 8 percent increase in purchasing power as a result of a loan,and the inflation rate is 5 percent,what is the nominal interest rate?

The unemployment rate rises any time there is an increase in the number of unemployed.

An individual with a Ph.D.in physics,who can find employment only in a pizza parlor,would be considered as

Which of the following is most likely to reduce structural unemployment?

During periods of inflation,the real value (purchasing power)of a given amount of nominal dollars decreases.

Consider an economy with an adult population of 100,50 of whom hold jobs,10 of whom are looking for work,and 15 of whom are retired.The labor force participation rate is

If top government officials claim that "more people are working now than ever before," which of the following must be true?

Suppose you received a 5 percent increase in your nominal wage.Over the year,inflation ran about 2 percent.Which of the following is true?

Which of the following people would be classified as unemployed?

Which of the following would lead to the most inflation?

An increase in the demand for loanable funds,other things constant,will increase the interest rate.

Unanticipated inflation is usually viewed as undesirable because it

A recent college graduate who is still looking for their first job,would be considered as

Which of the following is not an effect of hyperinflation?

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

Filters

Exhibit 7-1 -In Exhibit 7-1 the economy is initially facing AD₀and AS₀.Which of the following best describes the occurance of demand-pull inflation?