Question 1

List three different price indices and explain how they differ in terms of the market basket on which they are based.

Accepted Answer

Three examples of price indices are the

Question 2

To reduce the bias in the consumer price index,the Bureau of Labor Statistics

Accepted Answer

A) updates the market basket every two years,rather than every 10 years. 
B) updates the market basket every 10 years,rather than every two years. 
C) incorporates substitutions by consumers when prices of specific products rise rapidly. 
D) incorporates substitutions by consumers when prices of specific products fall rapidly. 
A) updates the market basket every two years,rather than every 10 years. 
B) updates the market basket every 10 years,rather than every two years. 
C) incorporates substitutions by consumers when prices of specific products rise rapidly. 
D) incorporates substitutions by consumers when prices of specific products fall rapidly.

Question 3

If the nominal interest rate is 6% and the inflation rate is 2% then the real interest rate is

Accepted Answer

A) 8%. 
B) 4%. 
C) 3%. 
D) 2%. 
E) 1%. 
A) 8%. 
B) 4%. 
C) 3%. 
D) 2%. 
E) 1%.

Question 4

The Bureau of Labor Statistics does not count discouraged workers as unemployed.Suppose discouraged workers were counted as unemployed.Explain how the unemployment rate and the labor force participation rate would change.

Accepted Answer

Both the unemployment rate and the labor

Question 5

If inflation is positive and is perfectly anticipated

Accepted Answer

A) those that borrow money lose. 
B) those that lend money lose. 
C) those that hold paper money lose. 
D) no one in the economy loses. 
A) those that borrow money lose. 
B) those that lend money lose. 
C) those that hold paper money lose. 
D) no one in the economy loses.

Question 6

If your nominal wage rises faster than the price level,we can say your real wage has ________ and the purchasing power of your income has ________.

Accepted Answer

A) fallen;fallen 
B) fallen;risen 
C) risen;risen 
D) risen;fallen 
A) fallen;fallen 
B) fallen;risen 
C) risen;risen 
D) risen;fallen

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

If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket,then

Accepted Answer

A) changes in the CPI accurately reflect the true rate of inflation. 
B) changes in the CPI understate the true rate of inflation. 
C) changes in the CPI overstate the true rate of inflation. 
D) changes in the CPI are unrelated to the true rate of inflation. 
A) changes in the CPI accurately reflect the true rate of inflation. 
B) changes in the CPI understate the true rate of inflation. 
C) changes in the CPI overstate the true rate of inflation. 
D) changes in the CPI are unrelated to the true rate of inflation.

Question 9

We say that the economy is at full employment if the unemployment rate is equal to

Accepted Answer

A) zero. 
B) the natural rate of unemployment. 
C) the amount of cyclical unemployment. 
D) the sum of frictional and cyclical unemployment. 
E) the sum of structural and cyclical unemployment. 
A) zero. 
B) the natural rate of unemployment. 
C) the amount of cyclical unemployment. 
D) the sum of frictional and cyclical unemployment. 
E) the sum of structural and cyclical unemployment.

Question 10

If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level,we would base our measure of inflation on

Accepted Answer

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

Question 11

Which of the following describes the accuracy of the Consumer Price Index?

Accepted Answer

A) Changes in the CPI accurately reflect the true rate of inflation. 
B) Changes in the CPI understate the true rate of inflation. 
C) Changes in the CPI overstate the true rate of inflation. 
D) Changes in the CPI are unrelated to the true rate of inflation. 
A) Changes in the CPI accurately reflect the true rate of inflation. 
B) Changes in the CPI understate the true rate of inflation. 
C) Changes in the CPI overstate the true rate of inflation. 
D) Changes in the CPI are unrelated to the true rate of inflation.

Question 12

Table 20-8
 $$\begin{array} { | c | c | } 
\hline \text { Year } & \text { CPI } ( \mathbf { 1 9 8 2 - 1 9 8 4 } = \mathbf { 1 0 0 } ) \
\hline 2015 & 100 \
\hline 2016 & 120 \
\hline
\end{array}$$
-Refer to Table 20-8.Suppose that the data in the table above reflect the price levels in the economy.What is the inflation rate in between 2015 and 2016?

Accepted Answer

A) 2% 
B) 5% 
C) 10% 
D) 12% 
E) 20% 
A) 2% 
B) 5% 
C) 10% 
D) 12% 
E) 20%

Question 13

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 14

The nominal interest rate will be less than the real interest rate when

Accepted Answer

A) the rate of inflation is positive but decreasing. 
B) the rate of inflation is positive and increasing. 
C) the rate of inflation is negative. 
D) the real interest rate is negative. 
A) the rate of inflation is positive but decreasing. 
B) the rate of inflation is positive and increasing. 
C) the rate of inflation is negative. 
D) the real interest rate is negative.

Question 15

The real rate of interest is

Accepted Answer

A) the nominal interest rate plus the inflation rate. 
B) the nominal interest rate minus the inflation rate. 
C) the interest rate determined by the supply and demand in the money market. 
D) the nominal interest rate. 
A) the nominal interest rate plus the inflation rate. 
B) the nominal interest rate minus the inflation rate. 
C) the interest rate determined by the supply and demand in the money market. 
D) the nominal interest rate.

Question 16

Jack lost his job six months ago,and he's been actively looking for a new job ever since.The Bureau of Labor Statistics would classify Jack as

Accepted Answer

A) unemployed. 
B) out of the labor force. 
C) a discouraged worker. 
D) all of the above. 
A) unemployed. 
B) out of the labor force. 
C) a discouraged worker. 
D) all of the above.

Question 17

Table 20-1
 $$\begin{array} { | l | r | } 
\hline \text { Total population } & 20,000 \
\hline \text { Working-age population } & 15,000 \
\hline \text { Employment } & 1,000 \
\hline \text { Unemployment } & 100 \
\hline
\end{array}$$ Consider the data above for a simple economy.
-Refer to Table 20-1.The labor force participation rate for this simple economy equals

Accepted Answer

A) (1,000/1,100)× 100. 
B) (1,000/15,000)× 100. 
C) (1,100/15,000)× 100. 
D) (1,100/20,000)× 100. 
A) (1,000/1,100)× 100. 
B) (1,000/15,000)× 100. 
C) (1,100/15,000)× 100. 
D) (1,100/20,000)× 100.

Question 18

If the CPI changes from 125 to 120 between 2015 and 2016,how did prices change between 2015 and 2016?

Accepted Answer

A) Prices increased by 5%. 
B) Prices decreased by 5% 
C) Prices increased by 25%. 
D) Prices decreased by 4%. 
A) Prices increased by 5%. 
B) Prices decreased by 5% 
C) Prices increased by 25%. 
D) Prices decreased by 4%.

Question 19

Suppose 180,000 people are employed,20,000 people are unemployed,the working-age population is 250,000,and 50,000 people are out of the labor force.Calculate the unemployment rate.

Accepted Answer

The unemployment rate is calculated as:

Question 20

If inflation is completely anticipated

Accepted Answer

A) no one loses in the economy. 
B) borrowers lose in the economy. 
C) lenders lose in the economy. 
D) firms lose because they incur menu costs. 
A) no one loses in the economy. 
B) borrowers lose in the economy. 
C) lenders lose in the economy. 
D) firms lose because they incur menu costs.

Exam 20: Unemployment and Inflation

List three different price indices and explain how they differ in terms of the market basket on which they are based.

To reduce the bias in the consumer price index,the Bureau of Labor Statistics

If the nominal interest rate is 6% and the inflation rate is 2% then the real interest rate is

The Bureau of Labor Statistics does not count discouraged workers as unemployed.Suppose discouraged workers were counted as unemployed.Explain how the unemployment rate and the labor force participation rate would change.

If inflation is positive and is perfectly anticipated

If your nominal wage rises faster than the price level,we can say your real wage has ________ and the purchasing power of your income has ________.

If the minimum wage is set above the market wage

If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket,then

We say that the economy is at full employment if the unemployment rate is equal to

If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level,we would base our measure of inflation on

Which of the following describes the accuracy of the Consumer Price Index?

Table 20-8 Year CPI (=) 2015 100 2016 120 -Refer to Table 20-8.Suppose that the data in the table above reflect the price levels in the economy.What is the inflation rate in between 2015 and 2016?

The cost to firms of changing prices

The nominal interest rate will be less than the real interest rate when

The real rate of interest is

Jack lost his job six months ago,and he's been actively looking for a new job ever since.The Bureau of Labor Statistics would classify Jack as

Table 20-1 Total population 20,000 Working-age population 15,000 Employment 1,000 Unemployment 100 Consider the data above for a simple economy. -Refer to Table 20-1.The labor force participation rate for this simple economy equals

If the CPI changes from 125 to 120 between 2015 and 2016,how did prices change between 2015 and 2016?

Suppose 180,000 people are employed,20,000 people are unemployed,the working-age population is 250,000,and 50,000 people are out of the labor force.Calculate the unemployment rate.

If inflation is completely anticipated

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

If your nominal wage rises faster than the price level,we can say your real wage has and the purchasing power of your income has .