Question 1

When deflation occurs

Accepted Answer

A) the real interest rate is greater than the nominal interest rate. 
B) the nominal interest rate is greater than the real interest rate. 
C) the nominal interest rate is equal to the real interest rate and inflation is negative. 
D) the nominal interest rate is equal to the real interest rate and inflation is positive. 
A) the real interest rate is greater than the nominal interest rate. 
B) the nominal interest rate is greater than the real interest rate. 
C) the nominal interest rate is equal to the real interest rate and inflation is negative. 
D) the nominal interest rate is equal to the real interest rate and inflation is positive.

Question 2

The "new product bias" in the consumer price index refers to the idea that

Accepted Answer

A) consumers switch to new goods when the prices of old goods increase,and the CPI overestimates the cost to consumers. 
B) consumers switch to old goods when the prices of new goods increase,and the CPI underestimates the cost to consumers. 
C) consumers prefer new goods,even if they are worse in quality than old goods,and this causes the CPI to underestimate the cost to consumers. 
D) new products' prices often decrease after their initial introduction,and the CPI is adjusted infrequently and overestimates the cost to consumers. 
A) consumers switch to new goods when the prices of old goods increase,and the CPI overestimates the cost to consumers. 
B) consumers switch to old goods when the prices of new goods increase,and the CPI underestimates the cost to consumers. 
C) consumers prefer new goods,even if they are worse in quality than old goods,and this causes the CPI to underestimate the cost to consumers. 
D) new products' prices often decrease after their initial introduction,and the CPI is adjusted infrequently and overestimates the cost to consumers.

Question 3

Which of the following would reduce the labor force participation rate,all else equal?

Accepted Answer

A) an increase in the number of people in the labor force 
B) an increase in the unemployment rate 
C) a decrease in the unemployment rate 
D) an increase in the working-age population 
A) an increase in the number of people in the labor force 
B) an increase in the unemployment rate 
C) a decrease in the unemployment rate 
D) an increase in the working-age population

Question 4

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest.If the inflation rate was 7%,what was the real interest rate you paid?

Accepted Answer

A) 17 percent 
B) 10 percent 
C) 7 percent 
D) 3 percent 
A) 17 percent 
B) 10 percent 
C) 7 percent 
D) 3 percent

Question 5

The short-term unemployment arising from the process of matching workers with jobs is called

Accepted Answer

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

Question 6

When actual inflation is less than expected inflation

Accepted Answer

A) borrowers lose and lenders gain. 
B) borrowers gain and lenders lose. 
C) borrowers and lenders both gain. 
D) borrowers and lenders both lose. 
A) borrowers lose and lenders gain. 
B) borrowers gain and lenders lose. 
C) borrowers and lenders both gain. 
D) borrowers and lenders both lose.

Question 7

A central concept in macroeconomics is the idea of the natural rate of unemployment.Why does it make sense to define full employment to occur when the unemployment rate equals the natural rate of unemployment,instead of when the unemployment rate equals zero? Elaborate and explain carefully.

Accepted Answer

With a growing,dynamic economy where bus

Question 8

Table 20-20
 $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Median Salary: } \
\text { New York Yankees }
\end{array} & \begin{array} { c } 
\text { CPI (1982-1984= } \
\mathbf { 1 0 0 } )
\end{array} \
\hline 1989 & \$ 500,000 & 124 \
\hline 2015 & 3,300,000 & 238 \
\hline
\end{array}$$ Salaries in major league baseball have soared over the last 30 to 40 years.Some of the salary increase is due to inflation.The table above reports the consumer price index and the median nominal salary of the New York Yankees for 1989 and 2015.
-Refer to Table 20-20.Calculate the real median salary of the New York Yankees in both 1982-1984 dollars and 2015 dollars.Calculate the percentage increase in the median salary of the Yankees from 1989 to 2015 in both nominal terms and in real terms.

Accepted Answer

Real median salary = @#LAT-DLM& × 100.
Real median

Question 9

The GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following describes actual trends in the U.S.labor force participation rate?

Accepted Answer

A) The labor force participation rate of adult men has risen since 1950. 
B) The labor force participation rate of adult women has fallen since 1950. 
C) The labor force participation rate of adult men not in school,but too young to retire has risen since 1950. 
D) The labor force participation rate of adult women has risen since 1950. 
E) The labor force participation rate of all adults has fallen since 1950. 
A) The labor force participation rate of adult men has risen since 1950. 
B) The labor force participation rate of adult women has fallen since 1950. 
C) The labor force participation rate of adult men not in school,but too young to retire has risen since 1950. 
D) The labor force participation rate of adult women has risen since 1950. 
E) The labor force participation rate of all adults has fallen since 1950.

Question 11

If inflation is unanticipated,no redistribution of income can occur.

Accepted Answer

A) True 
 B)False

Question 12

When an economy is at its natural rate of unemployment,which of the following will be true?

Accepted Answer

A) The unemployment rate will be 0%. 
B) The labor force participation rate will be 100%. 
C) The unemployment rate will be greater than 0%. 
D) Only structural unemployment as a result of technological change will exist in the economy. 
A) The unemployment rate will be 0%. 
B) The labor force participation rate will be 100%. 
C) The unemployment rate will be greater than 0%. 
D) Only structural unemployment as a result of technological change will exist in the economy.

Question 13

Table 20-2
  
-Refer to Table 20-2.Assume the market basket for the consumer price index has two products-bread and milk-with the following values in 2011 and 2016 for price and quantity: The Consumer Price Index for 2016 equals

Accepted Answer

A) 118. 
B) 116. 
C) 86. 
D) 85. 
A) 118. 
B) 116. 
C) 86. 
D) 85.

Question 14

Due to low interest rates,increased banking regulations,and technological change,JPMorgan Chase announced it would ________ the number of persons it employed in 2015 and this would ________ the total number of persons unemployed in the economy.

Accepted Answer

A) decrease;increase 
B) decrease;decrease 
C) increase;decrease 
D) increase;increase 
A) decrease;increase 
B) decrease;decrease 
C) increase;decrease 
D) increase;increase

Question 15

Suppose that in 2016,all prices in the economy double and that all wages and salaries also double.In 2016 you

Accepted Answer

A) are worse off than you were in 2015 as you can no longer afford to buy as many goods and services. 
B) are better off than you were in 2015 as your salary is higher than it was in 2015 and you can now buy more goods and services. 
C) are no better off or worse off than you were in 2015 as the purchasing power of your salary has remained the same. 
D) cannot determine whether you are better off or worse off than you were in 2015,because the purchasing power of your salary cannot be determined. 
A) are worse off than you were in 2015 as you can no longer afford to buy as many goods and services. 
B) are better off than you were in 2015 as your salary is higher than it was in 2015 and you can now buy more goods and services. 
C) are no better off or worse off than you were in 2015 as the purchasing power of your salary has remained the same. 
D) cannot determine whether you are better off or worse off than you were in 2015,because the purchasing power of your salary cannot be determined.

Question 16

When prices are rising,which of the following will be true?

Accepted Answer

A) The real interest rate will be lower than the nominal interest rate. 
B) The real interest rate will be negative. 
C) The real interest rate will be higher than the nominal interest rate. 
D) The nominal interest rate will be negative. 
A) The real interest rate will be lower than the nominal interest rate. 
B) The real interest rate will be negative. 
C) The real interest rate will be higher than the nominal interest rate. 
D) The nominal interest rate will be negative.

Question 17

What is the natural rate of unemployment,and what types of unemployment constitute the natural rate of unemployment?

Accepted Answer

The natural rate of unemployment is the

Question 18

If the federal government implements programs so that the unemployed are more quickly matched with jobs,then

Accepted Answer

A) the natural rate of unemployment will increase. 
B) the natural rate of unemployment will decrease. 
C) the natural rate of unemployment will not change. 
D) the natural rate of unemployment could either increase or decrease. 
A) the natural rate of unemployment will increase. 
B) the natural rate of unemployment will decrease. 
C) the natural rate of unemployment will not change. 
D) the natural rate of unemployment could either increase or decrease.

Question 19

Which of the following causes the unemployment rate to understate the true extent of joblessness?

Accepted Answer

A) Many full time workers really want to be part time workers. 
B) Persons who collect unemployment benefits report themselves to be searching for a job. 
C) Discouraged workers are not counted as unemployed. 
D) A drug dealer reports herself as unemployed. 
E) Discouraged workers are counted as unemployed. 
A) Many full time workers really want to be part time workers. 
B) Persons who collect unemployment benefits report themselves to be searching for a job. 
C) Discouraged workers are not counted as unemployed. 
D) A drug dealer reports herself as unemployed. 
E) Discouraged workers are counted as unemployed.

Question 20

The problem with inflation is that as prices rise,consumers can no longer afford to buy as many goods and services.

Accepted Answer

A) True 
 B)False

Exam 20: Unemployment and Inflation

When deflation occurs

The "new product bias" in the consumer price index refers to the idea that

Which of the following would reduce the labor force participation rate,all else equal?

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest.If the inflation rate was 7%,what was the real interest rate you paid?

The short-term unemployment arising from the process of matching workers with jobs is called

When actual inflation is less than expected inflation

A central concept in macroeconomics is the idea of the natural rate of unemployment.Why does it make sense to define full employment to occur when the unemployment rate equals the natural rate of unemployment,instead of when the unemployment rate equals zero? Elaborate and explain carefully.

The GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household.

Which of the following describes actual trends in the U.S.labor force participation rate?

If inflation is unanticipated,no redistribution of income can occur.

When an economy is at its natural rate of unemployment,which of the following will be true?

Table 20-2 -Refer to Table 20-2.Assume the market basket for the consumer price index has two products-bread and milk-with the following values in 2011 and 2016 for price and quantity: The Consumer Price Index for 2016 equals

Due to low interest rates,increased banking regulations,and technological change,JPMorgan Chase announced it would ________ the number of persons it employed in 2015 and this would ________ the total number of persons unemployed in the economy.

Suppose that in 2016,all prices in the economy double and that all wages and salaries also double.In 2016 you

When prices are rising,which of the following will be true?

What is the natural rate of unemployment,and what types of unemployment constitute the natural rate of unemployment?

If the federal government implements programs so that the unemployed are more quickly matched with jobs,then

Which of the following causes the unemployment rate to understate the true extent of joblessness?

The problem with inflation is that as prices rise,consumers can no longer afford to buy as many goods and services.

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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Due to low interest rates,increased banking regulations,and technological change,JPMorgan Chase announced it would the number of persons it employed in 2015 and this would the total number of persons unemployed in the economy.