Question 1

Which of the following is TRUE about the labor force?

Accepted Answer

A)  It includes those over 16 ages old and are employed. 
B)  It includes those over 16 ages old and are unemployed. 
C)  Both A and B are correct. 
D)  None of the above is correct. 
A)  It includes those over 16 ages old and are employed. 
B)  It includes those over 16 ages old and are unemployed. 
C)  Both A and B are correct. 
D)  None of the above is correct.

Question 2

-Using the above table, the labor force participation rate is

Accepted Answer

A)  65.6 percent. 
B)  73.8 percent. 
C)  81.8 percent. 
D)  69.1 percent. 
A)  65.6 percent. 
B)  73.8 percent. 
C)  81.8 percent. 
D)  69.1 percent.

Question 3

Historically speaking, business fluctuations in an economy were more commonly referred to as

Accepted Answer

A)  inflationary pressures. 
B)  economic growth. 
C)  bulls and bears. 
D)  business cycles. 
A)  inflationary pressures. 
B)  economic growth. 
C)  bulls and bears. 
D)  business cycles.

Question 4

The real rate of interest is defined as

Accepted Answer

A)  zero. 
B)  the nominal rate of interest. 
C)  the nominal rate of interest minus the anticipated inflation rate. 
D)  the nominal rate of interest plus the anticipated inflation rate. 
A)  zero. 
B)  the nominal rate of interest. 
C)  the nominal rate of interest minus the anticipated inflation rate. 
D)  the nominal rate of interest plus the anticipated inflation rate.

Question 5

During a recession

Accepted Answer

A)  incomes rise and employment decreases. 
B)  incomes fall and unemployment increases. 
C)  incomes fall and unemployment falls. 
D)  incomes rise and unemployment increases. 
A)  incomes rise and employment decreases. 
B)  incomes fall and unemployment increases. 
C)  incomes fall and unemployment falls. 
D)  incomes rise and unemployment increases.

Question 6

Which of the following individuals is NOT counted as unemployed?

Accepted Answer

A)  Jamil, who recently quit his job and is looking for a new position 
B)  Jackie, who was recently fired and is now applying for another job 
C)  Jack, who has become discouraged about ever finding a job and has stopped looking 
D)  Jennifer, who just graduated from college and is now seeking employment with the company of her dreams. 
A)  Jamil, who recently quit his job and is looking for a new position 
B)  Jackie, who was recently fired and is now applying for another job 
C)  Jack, who has become discouraged about ever finding a job and has stopped looking 
D)  Jennifer, who just graduated from college and is now seeking employment with the company of her dreams.

Question 7

If a bank advertises 3 percent interest for a checking account and the anticipated rate of inflation is 3.5 percent

Accepted Answer

A)  the real rate of interest earned on the account is 0.5 percent. 
B)  the real rate of interest earned on the account is -0.5 percent. 
C)  the real rate of interest earned on the account is 6.5 percent. 
D)  the real rate of interest earned on the account is 3.25 percent. 
A)  the real rate of interest earned on the account is 0.5 percent. 
B)  the real rate of interest earned on the account is -0.5 percent. 
C)  the real rate of interest earned on the account is 6.5 percent. 
D)  the real rate of interest earned on the account is 3.25 percent.

Question 8

Changes in business activity are

Accepted Answer

A)  referred to as business fluctuations. 
B)  referred to as the ebb and flow of business. 
C)  always undesirable. 
D)  caused by the changing seasons every year. 
A)  referred to as business fluctuations. 
B)  referred to as the ebb and flow of business. 
C)  always undesirable. 
D)  caused by the changing seasons every year.

Question 9

To be officially counted as unemployed, a person must be

Accepted Answer

A)  at least 16 years old. 
B)  at least 18 years old. 
C)  at least 21 years old. 
D)  any age, so long as you are looking for work. 
A)  at least 16 years old. 
B)  at least 18 years old. 
C)  at least 21 years old. 
D)  any age, so long as you are looking for work.

Question 10

The menu cost of inflation involves

Accepted Answer

A)  the mistakes producers make in adjusting prices. 
B)  the mistake people make when they do not know the actual rate of inflation. 
C)  cost-of-living adjustments. 
D)  the costs associated with changing price lists. 
A)  the mistakes producers make in adjusting prices. 
B)  the mistake people make when they do not know the actual rate of inflation. 
C)  cost-of-living adjustments. 
D)  the costs associated with changing price lists.

Question 11

In a small country, there are 5,000 people in the labor force and 4,000 people are employed. The labor force participation rate equals

Accepted Answer

A)  40 percent. 
B)  90 percent. 
C)  80 percent. 
D)  an undetermined amount given the lack of information. 
A)  40 percent. 
B)  90 percent. 
C)  80 percent. 
D)  an undetermined amount given the lack of information.

Question 12

Why is there a resource cost associated with inflation?

Accepted Answer

A)  because unemployment increases when there is inflation 
B)  because most workers end up working fewer hours during periods of inflation 
C)  because consumers, workers, and firms devote resources to protecting themselves from the financial costs of inflation 
D)  because the existence of inflation discourages people from placing their savings in interest-bearing accounts, where it is needed to fund capital investment 
A)  because unemployment increases when there is inflation 
B)  because most workers end up working fewer hours during periods of inflation 
C)  because consumers, workers, and firms devote resources to protecting themselves from the financial costs of inflation 
D)  because the existence of inflation discourages people from placing their savings in interest-bearing accounts, where it is needed to fund capital investment

Question 13

The Producer Price Index (PPI) is a

Accepted Answer

A)  statistical measure of a weighted average of prices of a specific set of goods and services purchased by wage earners in urban areas. 
B)  statistical measure of a weighted average of prices of commodities that firms produce and sell. 
C)  price index measuring the changes in prices of all new goods and services produced in the economy. 
D)  price index that tracks the price levee of commodities that firms purchase from other firms. 
A)  statistical measure of a weighted average of prices of a specific set of goods and services purchased by wage earners in urban areas. 
B)  statistical measure of a weighted average of prices of commodities that firms produce and sell. 
C)  price index measuring the changes in prices of all new goods and services produced in the economy. 
D)  price index that tracks the price levee of commodities that firms purchase from other firms.

Question 14

The peak phase of the business cycle represents

Accepted Answer

A)  a temporary maximum output level of Gross Domestic Product (GDP). 
B)  an increase in foreign investment. 
C)  a labor surplus. 
D)  falling prices. 
A)  a temporary maximum output level of Gross Domestic Product (GDP). 
B)  an increase in foreign investment. 
C)  a labor surplus. 
D)  falling prices.

Question 15

What is a price index? How do the CPI, the PPI, the PCE Index and the GDP deflator differ?

Accepted Answer

A price index is the cost of today's mar

Question 16

With regard to employment status, the adult population is divided into what three groups? How is it determined whether someone is in the labor force or not?

Accepted Answer

The adult population is in one of three

Question 17

The U.S. Department of Labor classifies all individuals in the United States as

Accepted Answer

A)  labor force participants. 
B)  either employed, unemployed, or not in the labor force. 
C)  either overemployed or underemployed. 
D)  potential employees. 
A)  labor force participants. 
B)  either employed, unemployed, or not in the labor force. 
C)  either overemployed or underemployed. 
D)  potential employees.

Question 18

The largest category of the unemployed are

Accepted Answer

A)  job losers. 
B)  reentrants. 
C)  job leavers. 
D)  new entrants. 
A)  job losers. 
B)  reentrants. 
C)  job leavers. 
D)  new entrants.

Question 19

A severe and prolonged recession is called

Accepted Answer

A)  a slump. 
B)  a stagnation. 
C)  a trough. 
D)  a depression. 
A)  a slump. 
B)  a stagnation. 
C)  a trough. 
D)  a depression.

Question 20

Full employment means that

Accepted Answer

A)  everyone who wants a job has a job, although it may not be the job they really want. 
B)  everyone who wants a job has a job, and they have the job they most prefer. 
C)  taking seasonal fluctuations into account, only frictional and structural unemployment exist. 
D)  the sum of structural and cyclical unemployment is greater than frictional unemployment. 
A)  everyone who wants a job has a job, although it may not be the job they really want. 
B)  everyone who wants a job has a job, and they have the job they most prefer. 
C)  taking seasonal fluctuations into account, only frictional and structural unemployment exist. 
D)  the sum of structural and cyclical unemployment is greater than frictional unemployment.

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

Which of the following is TRUE about the labor force?

-Using the above table, the labor force participation rate is

Historically speaking, business fluctuations in an economy were more commonly referred to as

The real rate of interest is defined as

During a recession

Which of the following individuals is NOT counted as unemployed?

If a bank advertises 3 percent interest for a checking account and the anticipated rate of inflation is 3.5 percent

Changes in business activity are

To be officially counted as unemployed, a person must be

The menu cost of inflation involves

In a small country, there are 5,000 people in the labor force and 4,000 people are employed. The labor force participation rate equals

Why is there a resource cost associated with inflation?

The Producer Price Index (PPI) is a

The peak phase of the business cycle represents

What is a price index? How do the CPI, the PPI, the PCE Index and the GDP deflator differ?

With regard to employment status, the adult population is divided into what three groups? How is it determined whether someone is in the labor force or not?

The U.S. Department of Labor classifies all individuals in the United States as

The largest category of the unemployed are

A severe and prolonged recession is called

Full employment means that

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

Filters