Question 1

Which of the following is true about the consumer price index?

Accepted Answer

A) It accounts for people switching to goods whose prices have fallen. 
B) It assumes that consumers purchase the same amount of each product in the market basket each month. 
C) It frequently updates the price changes of new products added to the market basket,as these have a tendency to fall. 
D) It filters out the part of price increases that occurs because of quality improvements in products. 
A) It accounts for people switching to goods whose prices have fallen. 
B) It assumes that consumers purchase the same amount of each product in the market basket each month. 
C) It frequently updates the price changes of new products added to the market basket,as these have a tendency to fall. 
D) It filters out the part of price increases that occurs because of quality improvements in products.

Question 2

You lend $5,000 to a friend for one year at a nominal interest rate of 10%.The CPI over that year rises from 180 to 190.What is the real rate of interest you will earn?

Accepted Answer

A) 0% 
B) 4.4% 
C) 5.5% 
D) 5.8% 
A) 0% 
B) 4.4% 
C) 5.5% 
D) 5.8%

Question 3

Which of the following would be a consequence of substitution bias in the CPI?

Accepted Answer

A) Social Security payments would not adequately compensate retired workers for inflation. 
B) Businesses would overcompensate employees for inflation when giving cost of living raises. 
C) The inflation rate based on the CPI would underestimate the true level of inflation. 
D) Judges would award child support payments that would not adequately keep up with the true cost of inflation. 
A) Social Security payments would not adequately compensate retired workers for inflation. 
B) Businesses would overcompensate employees for inflation when giving cost of living raises. 
C) The inflation rate based on the CPI would underestimate the true level of inflation. 
D) Judges would award child support payments that would not adequately keep up with the true cost of inflation.

Question 4

Explain why you would rather be a borrower during a period of unexpected rising inflation,and a lender during a period of unexpected declining inflation.

Accepted Answer

The nominal interest rate includes a cha

Question 5

Which of the following statements is true about the U.S.economy?

Accepted Answer

A) Each year,many new jobs are created,but few existing jobs are destroyed,and the unemployed find jobs quickly. 
B) Each year,few new jobs are created,but few existing jobs are destroyed,keeping unemployment low. 
C) Each year,many new jobs are created and many existing jobs are destroyed. 
D) Each year few jobs are created,and therefore it takes the unemployed a long time to find a new job. 
A) Each year,many new jobs are created,but few existing jobs are destroyed,and the unemployed find jobs quickly. 
B) Each year,few new jobs are created,but few existing jobs are destroyed,keeping unemployment low. 
C) Each year,many new jobs are created and many existing jobs are destroyed. 
D) Each year few jobs are created,and therefore it takes the unemployed a long time to find a new job.

Question 6

Figure 20-1  
-Refer to Figure 20-1.Based on the graph of the labor market above,if a minimum wage of $8 per hour is imposed,which of the following will result?

Accepted Answer

A) The quantity of labor demanded by firms will rise. 
B) The quantity of labor demanded by firms will fall. 
C) The unemployment rate will fall. 
D) Both A and C will occur. 
A) The quantity of labor demanded by firms will rise. 
B) The quantity of labor demanded by firms will fall. 
C) The unemployment rate will fall. 
D) Both A and C will occur.

Question 7

The costs to firms of changing prices are called

Accepted Answer

A) redistribution costs. 
B) menu costs. 
C) anticipation costs. 
D) money illusion costs. 
A) redistribution costs. 
B) menu costs. 
C) anticipation costs. 
D) money illusion costs.

Question 8

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey

Accepted Answer

A) is based on actual payrolls,rather than on unverified answers. 
B) includes the number of self-employed persons. 
C) includes persons employed at newly opened firms. 
D) provides an estimate of the number of persons unemployed. 
A) is based on actual payrolls,rather than on unverified answers. 
B) includes the number of self-employed persons. 
C) includes persons employed at newly opened firms. 
D) provides an estimate of the number of persons unemployed.

Question 9

Efficiency wages cause unemployment because

Accepted Answer

A) firms pay wages that are below the market wage,causing the quantity of labor demanded to be greater than the quantity of labor supplied. 
B) firms pay wages that are below the market wage,causing the quantity of labor demanded to be less than the quantity of labor supplied. 
C) firms pay wages that are above the market wage,causing the quantity of labor demanded to be greater than the quantity of labor supplied. 
D) firms pay wages that are above the market wage,causing the quantity of labor demanded to be less than the quantity of labor supplied. 
A) firms pay wages that are below the market wage,causing the quantity of labor demanded to be greater than the quantity of labor supplied. 
B) firms pay wages that are below the market wage,causing the quantity of labor demanded to be less than the quantity of labor supplied. 
C) firms pay wages that are above the market wage,causing the quantity of labor demanded to be greater than the quantity of labor supplied. 
D) firms pay wages that are above the market wage,causing the quantity of labor demanded to be less than the quantity of labor supplied.

Question 10

Housing is the largest component of the U.S.CPI market basket.

Accepted Answer

A) True 
 B)False

Question 11

Nominal income is equal to real income if the CPI is less than 100.

Accepted Answer

A) True 
 B)False

Question 12

The labor force participation rates of women have rapidly increased since 1948.

Accepted Answer

A) True 
 B)False

Question 13

In August 2015,the U.S.unemployment rate was highest for

Accepted Answer

A) whites. 
B) Hispanics. 
C) high school dropouts. 
D) African Americans. 
E) Asians. 
A) whites. 
B) Hispanics. 
C) high school dropouts. 
D) African Americans. 
E) Asians.

Question 14

The unemployment rate equals the number of unemployed divided by the ________,all times 100.

Accepted Answer

A) number of employed 
B) labor force 
C) working-age population 
D) total population 
A) number of employed 
B) labor force 
C) working-age population 
D) total population

Question 15

Sarah is a full-time student who is not looking for work.What kind of unemployment is Sarah experiencing?

Accepted Answer

A) cyclical 
B) structural 
C) frictional 
D) Sarah is not experiencing unemployment of any kind,because she is not currently part of the labor force. 
A) cyclical 
B) structural 
C) frictional 
D) Sarah is not experiencing unemployment of any kind,because she is not currently part of the labor force.

Question 16

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 17

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 18

Which of the following is not a cost posed by inflation?

Accepted Answer

A) Inflation reduces the affordability of goods and services to the average consumer. 
B) The money that consumers and firms hold loses its purchasing power. 
C) Firms must pay for changing prices on products and printing new catalogs. 
D) Banks can lose if they under predict inflation and charge an interest rate that does not completely compensate for inflation. 
A) Inflation reduces the affordability of goods and services to the average consumer. 
B) The money that consumers and firms hold loses its purchasing power. 
C) Firms must pay for changing prices on products and printing new catalogs. 
D) Banks can lose if they under predict inflation and charge an interest rate that does not completely compensate for inflation.

Question 19

The broadest measure of the price level that includes all final goods and services is

Accepted Answer

A) the producer price index . 
B) the consumer price index. 
C) the GDP deflator. 
D) the wholesale price index. 
A) the producer price index . 
B) the consumer price index. 
C) the GDP deflator. 
D) the wholesale price index.

Question 20

Which of the following individuals would be most negatively affected by anticipated inflation?

Accepted Answer

A) a retired railroad engineer who receives a fixed income payment every month 
B) a union contractor whose pay is adjusted based on changes in the CPI 
C) a full-time employee at a pizza parlor who makes more than the minimum wage 
D) a student who borrows $10,000 at a nominal interest rate of 5% to finance educational expenses 
A) a retired railroad engineer who receives a fixed income payment every month 
B) a union contractor whose pay is adjusted based on changes in the CPI 
C) a full-time employee at a pizza parlor who makes more than the minimum wage 
D) a student who borrows $10,000 at a nominal interest rate of 5% to finance educational expenses

Exam 20: Unemployment and Inflation

Which of the following is true about the consumer price index?

You lend $5,000 to a friend for one year at a nominal interest rate of 10%.The CPI over that year rises from 180 to 190.What is the real rate of interest you will earn?

Which of the following would be a consequence of substitution bias in the CPI?

Explain why you would rather be a borrower during a period of unexpected rising inflation,and a lender during a period of unexpected declining inflation.

Which of the following statements is true about the U.S.economy?

Figure 20-1 -Refer to Figure 20-1.Based on the graph of the labor market above,if a minimum wage of $8 per hour is imposed,which of the following will result?

The costs to firms of changing prices are called

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey

Efficiency wages cause unemployment because

Housing is the largest component of the U.S.CPI market basket.

Nominal income is equal to real income if the CPI is less than 100.

The labor force participation rates of women have rapidly increased since 1948.

In August 2015,the U.S.unemployment rate was highest for

The unemployment rate equals the number of unemployed divided by the ________,all times 100.

Sarah is a full-time student who is not looking for work.What kind of unemployment is Sarah experiencing?

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

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

Which of the following is not a cost posed by inflation?

The broadest measure of the price level that includes all final goods and services is

Which of the following individuals would be most negatively affected by anticipated inflation?

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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