Question 1

What is unemployment and what is the unemployment rate? What are the costs of unemployment?

Accepted Answer

Unemployment refers to someone who is wi

Question 2

An example of a frictionally unemployed individual is

Accepted Answer

A)  Charles, who has lost his job as an auto worker because of increased imports. 
B)  Mary, who quit her job to find work closer to her home. 
C)  Sam, who lost his job as a real estate salesperson when the housing market went soft. 
D)  Cynthia, who has few skills and is no longer looking for work. 
A)  Charles, who has lost his job as an auto worker because of increased imports. 
B)  Mary, who quit her job to find work closer to her home. 
C)  Sam, who lost his job as a real estate salesperson when the housing market went soft. 
D)  Cynthia, who has few skills and is no longer looking for work.

Question 3

After completing college, Ahmed spent three months looking for a job. During this period he would be classified as

Accepted Answer

A)  frictionally unemployed. 
B)  not in the labor force. 
C)  cyclically unemployed. 
D)  structurally unemployed. 
A)  frictionally unemployed. 
B)  not in the labor force. 
C)  cyclically unemployed. 
D)  structurally unemployed.

Question 4

A recession may be defined as

Accepted Answer

A)  a period during which the rate of growth of business activity is consistently less than its long-term trend. 
B)  an increase in real economic output from one period to the next. 
C)  no change in real economic output over a period of time. 
D)  no change in the dollar (money) value of economic output over a period of time. 
A)  a period during which the rate of growth of business activity is consistently less than its long-term trend. 
B)  an increase in real economic output from one period to the next. 
C)  no change in real economic output over a period of time. 
D)  no change in the dollar (money) value of economic output over a period of time.

Question 5

Unemployment that results from business recessions that occur when aggregate demand is insufficient to create full employment is

Accepted Answer

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

Question 6

If you anticipate that the inflation rate is going to rise from 2 percent to 5 percent next year, you should

Accepted Answer

A)  save your funds at a fixed rate of interest. 
B)  borrow funds at a fixed rate of interest. 
C)  keep your funds in your sock drawer. 
D)  wait to buy a house until next year. 
A)  save your funds at a fixed rate of interest. 
B)  borrow funds at a fixed rate of interest. 
C)  keep your funds in your sock drawer. 
D)  wait to buy a house until next year.

Question 7

The fact that a number of lifeguards lose their jobs at the end of each summer would be counted as

Accepted Answer

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

Question 8

In what ways is the consumer price index flawed?

Accepted Answer

There are at least three problems with t

Question 9

To be considered officially unemployed, a person must be at least 16 years old

Accepted Answer

A)  and not working. 
B)  and not in school and not working. 
C)  and be a discouraged worker. 
D)  and not working but is actively seeking employment. 
A)  and not working. 
B)  and not in school and not working. 
C)  and be a discouraged worker. 
D)  and not working but is actively seeking employment.

Question 10

Who is likely to be helped by unanticipated inflation?

Accepted Answer

A)  lenders 
B)  borrowers 
C)  all consumers 
D)  all producers 
A)  lenders 
B)  borrowers 
C)  all consumers 
D)  all producers

Question 11

Empirical evidence shows that the nominal interest rate typically rises at the same time the inflation rate increases. What does this suggest?

Accepted Answer

A)  The real rate of interest is zero. 
B)  Increases in the current inflation rate lead borrowers and lenders to expect that inflation in the future will be higher than previously thought. 
C)  Interest rate changes are the main component of the CPI. 
D)  Interest rate changes are the main component of the GDP deflator. 
A)  The real rate of interest is zero. 
B)  Increases in the current inflation rate lead borrowers and lenders to expect that inflation in the future will be higher than previously thought. 
C)  Interest rate changes are the main component of the CPI. 
D)  Interest rate changes are the main component of the GDP deflator.

Question 12

Which of the following statements is NOT true about inflation?

Accepted Answer

A)  Inflation is a sustained increase in the average prices of goods in the economy. 
B)  During an inflationary period, the prices of some goods will increase while the price of some goods will decrease. 
C)  When there is inflation, the purchasing power of a dollar decreases. 
D)  During an inflationary period, the prices of all goods will increase. 
A)  Inflation is a sustained increase in the average prices of goods in the economy. 
B)  During an inflationary period, the prices of some goods will increase while the price of some goods will decrease. 
C)  When there is inflation, the purchasing power of a dollar decreases. 
D)  During an inflationary period, the prices of all goods will increase.

Question 13

The labor force participation rate includes

Accepted Answer

A)  only those who are employed. 
B)  only those employed but looking for a job. 
C)  both employed workers and discouraged workers not seeking jobs. 
D)  both employed workers and those unemployed but seeking employment. 
A)  only those who are employed. 
B)  only those employed but looking for a job. 
C)  both employed workers and discouraged workers not seeking jobs. 
D)  both employed workers and those unemployed but seeking employment.

Question 14

With respect to the interest rate, the inflationary premium

Accepted Answer

A)  is added to the nominal rate of interest to obtain the real rate of interest. 
B)  is the interest rate expressed in today's dollars. 
C)  covers anticipated depreciation in purchasing power. 
D)  is derived from the COLA. 
A)  is added to the nominal rate of interest to obtain the real rate of interest. 
B)  is the interest rate expressed in today's dollars. 
C)  covers anticipated depreciation in purchasing power. 
D)  is derived from the COLA.

Question 15

A recent accounting graduate from a major business school is searching for a place to begin his career as an accountant. This individual is

Accepted Answer

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

Question 16

Full employment in the United States today

Accepted Answer

A)  means a 100% employment rate. 
B)  means 0% unemployment for 6 months. 
C)  means about a 95% employment rate. 
D)  means that the cyclical unemployment rate is about 5%. 
A)  means a 100% employment rate. 
B)  means 0% unemployment for 6 months. 
C)  means about a 95% employment rate. 
D)  means that the cyclical unemployment rate is about 5%.

Question 17

In the history of the United States, unemployment reached its highest rate

Accepted Answer

A)  in the Panic of 1893. 
B)  in the 1930s. 
C)  in the period between World War II and the Korean War. 
D)  in the Great Recession of the late 2000s. 
A)  in the Panic of 1893. 
B)  in the 1930s. 
C)  in the period between World War II and the Korean War. 
D)  in the Great Recession of the late 2000s.

Question 18

Deflation is the situation when

Accepted Answer

A)  the rate at which prices increase falls. 
B)  the average of all prices is declining. 
C)  the real rate of interest is negative. 
D)  some prices are increasing and some are declining. 
A)  the rate at which prices increase falls. 
B)  the average of all prices is declining. 
C)  the real rate of interest is negative. 
D)  some prices are increasing and some are declining.

Question 19

Suppose medical care makes up 5 percent of the CPI index, and that prices rise in the medical care area faster than in the rest of the economy. An elderly couple spends 15 percent of their income on medical care. For this couple, the CPI

Accepted Answer

A)  understates the inflation rate because of the importance of medical care for this family. 
B)  overstates the inflation rate because this family is not typical of the country as a whole. 
C)  understates the inflation rate because the CPI always understates inflation. 
D)  is a good measure of inflation since the bias inherent in the CPI is offset by the increased emphasis on health care for this family. 
A)  understates the inflation rate because of the importance of medical care for this family. 
B)  overstates the inflation rate because this family is not typical of the country as a whole. 
C)  understates the inflation rate because the CPI always understates inflation. 
D)  is a good measure of inflation since the bias inherent in the CPI is offset by the increased emphasis on health care for this family.

Question 20

A country's labor force is equal to

Accepted Answer

A)  the population between the ages of 16 and 65. 
B)  the number of employed people. 
C)  the total number of employed and unemployed people. 
D)  the total number of employed people, unemployed people, and discouraged workers. 
A)  the population between the ages of 16 and 65. 
B)  the number of employed people. 
C)  the total number of employed and unemployed people. 
D)  the total number of employed people, unemployed people, and discouraged workers.

Exam 7: The Macroeconomy: Unemployment, Inflation, and Deflation

What is unemployment and what is the unemployment rate? What are the costs of unemployment?

An example of a frictionally unemployed individual is

After completing college, Ahmed spent three months looking for a job. During this period he would be classified as

A recession may be defined as

Unemployment that results from business recessions that occur when aggregate demand is insufficient to create full employment is

If you anticipate that the inflation rate is going to rise from 2 percent to 5 percent next year, you should

The fact that a number of lifeguards lose their jobs at the end of each summer would be counted as

In what ways is the consumer price index flawed?

To be considered officially unemployed, a person must be at least 16 years old

Who is likely to be helped by unanticipated inflation?

Empirical evidence shows that the nominal interest rate typically rises at the same time the inflation rate increases. What does this suggest?

Which of the following statements is NOT true about inflation?

The labor force participation rate includes

With respect to the interest rate, the inflationary premium

A recent accounting graduate from a major business school is searching for a place to begin his career as an accountant. This individual is

Full employment in the United States today

In the history of the United States, unemployment reached its highest rate

Deflation is the situation when

Suppose medical care makes up 5 percent of the CPI index, and that prices rise in the medical care area faster than in the rest of the economy. An elderly couple spends 15 percent of their income on medical care. For this couple, the CPI

A country's labor force is equal to

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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