Question 1

The biases in the CPI are

Accepted Answer

A)  important only to economists, not the real world. 
B)  not important since they are so small. 
C)  not important although they are large. 
D)  important since they effect nearly 1/3 of federal government spending.

Question 2

ʺThe market basket used to calculate the CPI is revised monthly to more accurately depict consumersʹ choices. The price data for the CPI are collected every month.ʺ Are the previous sentences true or false?

Accepted Answer

The answer of ʺThe market basket used to calculate the...

Question 3

Suppose the country of Tiny Town decided to open its borders to free trade. As a result, a number of its workers lost their jobs to international competition and canʹt find new jobs because their skills donʹt match what is required for job openings. The workers who lost their jobs and searched for new ones are best be considered part of

Accepted Answer

A)  cyclical unemployment. 
B)  frictional unemployment. 
C)  structural unemployment 
D)  discouraged workers.

Question 4

\[\begin{array} { | l | l | } 
\hline \text { Person A } & \begin{array} { l } 
\text { Now that the kids are in school for a full day, this } \
\text { person } \
\text { is looking for work and has interviewed for three jobs } \
\text { during the past two weeks. }
\end{array} \
\hline \text { Person B } & \begin{array} { l } 
\text { This person has been laid off from a job but expects to } \
\text { be } \
\text { called back as soon as the economy improves. }
\end{array} \
\hline \text { Person C } & \begin{array} { l } 
\text { This person has just graduated from college and will } \
\text { start a new job in three weeks. In the meantime this } \
\text { person will tour the great A merican b eaches. }
\end{array} \
\hline \text { Person D } & \begin{array} { l } 
\text { This person was laid off last year when new } \
\text { equipment } \
\text { was installed at the plant, reducing the number of } \
\text { workers needed.Shortly after beinglaid off, this } \
\text { person looked for a new job, w as unable to find one } \
\text { and then stopped looking, even though this person } \
\text { still wants a job and is available for work. }
\end{array} \
\hline
\end{array}\]
-The above table shows answers given by people interviewed in a government survey of households. Which individuals are considered to be a part of the labor force?

Accepted Answer

A)  A, C, and D 
B)  A, B, and C 
C)  B, C, and D 
D)  C and D

Question 5

$$\begin{array} { | c | l | l | l | } 
\hline \begin{array} { l } 
\text { Total } \
\text { population } \
\text { (millions) }
\end{array} & \begin{array} { c } 
\text { Currently } \
\text { employed } \
\text { (millions) }
\end{array} & \begin{array} { c } 
\text { Not working } \
\text { and looking for } \
\text { work (millions) }
\end{array} & \begin{array} { c } 
\text { Want to work but } \
\text { no longer looking } \
\text { for work } \
\text { (millions) }
\end{array} \
\hline 80 & 40 & 2 & 4 \
\hline
\end{array}$$
-The labor force participation rate is calculated as the

Accepted Answer

A)  labor force divided by the working age population then multiplied by 100. 
B)  labor force divided by the unemployment rate then multiplied by 100. 
C)  number of persons unemployed divided by the labor force then multiplied by 100. 
D)  labor force divided by the number of persons employed then multiplied by 100.

Question 6

If the CPI this year is 175.2 and next year the CPI is 176.1, what was the inflation rate over the year?

Accepted Answer

The answer of If the CPI this year is 175.2...

Question 7

An economy is at full employment when__________ .

Accepted Answer

A)  the unemployment rate is zero 
B)  the unemployment rate equals the natural unemployment rate 
C)  there is no structural unemployment 
D)  there is no frictional unemployment

Question 8

Suppose that the price level was 100 in 2008, 110 in 2009, and 130 in 2010. Over these three years,

Accepted Answer

A)  prices were stable. 
B)  deflation occurred at an accelerating rate. 
C)  the inflation rate was positive and accelerating. 
D)  the inflation rate was positive but slowing.

Question 9

What is the relationship between the natural unemployment rate, the unemployment rate, potential GDP, and actual GDP?

Accepted Answer

The answer of What is the relationship between the natural...

Question 10

When the unemployment rate is less than the natural unemployment rate,

Accepted Answer

A)  the output gap is negative. 
B)  the output gap is positive. 
C)  the output gap equals zero. 
D)  None of the above is possible because it is impossible for the unemployment rate to be less than the natural rate.

Question 11

Based on the following data for the country of Tiny Town, the employment-to-population ratio equals__________ multiplied by 100.
Population = 200
Working age population = 100 Labor Force = 90
Number of employed persons = 75

Accepted Answer

A)  90/100. 
B)  75/100. 
C)  75/200 
D)  90/200.

Question 12

Suppose the working-age population is 150 million, the labor force is 125 million, and employment is 120 million.
a) What is the unemployment rate?
b) Now suppose that 2 million students graduate from college and begin to look for jobs. What is the new unemployment rate if none of the students have found jobs yet?
c) Suppose that all 2 million students find jobs. What is the unemployment rate now?

Accepted Answer

The answer of Suppose the working-age population is 150 million,...

Question 13

Frictional unemployment includes

Accepted Answer

A)  unemployment caused by automation of the work place that displaces unskilled workers. 
B)  unemployment caused by industries moving overseas to better meet foreign competition. 
C)  unemployment caused by normal labor turnover associated with people leaving and entering the labor force. 
D)  unemployment caused by a lack of education so that workers do not possess necessary job skills.

Question 14

Suppose there are 180 million employed people and 20 million unemployed people.
a) What is the unemployment rate?
b) Suppose that 5 million unemployed people give up their search for jobs and become discouraged workers. What is the new official unemployment rate?

Accepted Answer

The answer of Suppose there are 180 million employed people...

Question 15

Cyclical unemployment exists when

Accepted Answer

A)  real GDP exceeds potential GDP. 
B)  frictional and structural unemployment is zero. 
C)  real national income exceeds potential income. 
D)  real GDP is less than potential GDP.

Question 16

Full employment occurs when

Accepted Answer

A)  there is no unemployment. 
B)  there is no frictional unemployment. 
C)  there is no cyclical unemployment. 
D)  the unemployment rate is less than 5 percent.

Question 17

Nicholas does not possess marketable job skills; therefore, he is

Accepted Answer

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

Question 18

Suppose the current unemployment rate is 5 percent, the labor force is 400 million people, the labor force participation rate is 80 percent and the working-age population is 500 million people. What number of people are unemployed?

Accepted Answer

The answer of Suppose the current unemployment rate is 5...

Question 19

Give an example of a structurally unemployed person.

Accepted Answer

The answer of Give an example of a structurally unemployed...

Question 20

Explain the relationships) between full employment, cyclical unemployment, the natural unemployment rate, and potential GDP.

Accepted Answer

The answer of Explain the relationships) between full employment, cyclical...

Exam 5: Monitoring Jobs and Inflation