Question 1

Mike has just graduated from college and is now looking for a job, but has not yet found one. This causes the unemployment rate to _______ and the labor- force participation rate to _______.

Accepted Answer

A)  increase; stay the same 
B)  increase; increase 
C)  increase; decrease 
D)  stay the same; stay the same

Question 2

The cost of the basket of goods in Year 1 is $200 and the cost of the basket of goods in Year 2 is $225. If Year 1 is used as the base year, the Year 2 price index is:

Accepted Answer

A)  112.5. 
B)  150. 
C)  80. 
D)  66.67.

Question 3

A "menu cost" is the cost associated with:

Accepted Answer

A)  changing price lists when there is inflation. 
B)  buying new shoes. 
C)  designing a new menu for a restaurant. 
D)  trying to reduce holdings of cash.

Question 4

Answer parts (a) through (d) using the information in Table 6.7.
(a) Calculate the number of unemployed workers.
(b) Calculate the number of workers in the labor force.
(c) Calculate the unemployment rate.
(d) Calculate the labor- force participation rate.
(e) Calculate the unemployment rate if 50,000 unemployed workers become "discouraged" and decide to stop looking for work?

Accepted Answer

The answer of Answer parts (a) through (d) using the...

Question 5

Discouraged workers:

Accepted Answer

A)  are part of structural unemployment. 
B)  are part of frictional unemployment. 
C)  are not considered as part of the labor force. 
D)  are part of the labor force.

Question 6

What are some of the problems associated with using the Consumer Price Index as a measure of changes in the cost of living?

Accepted Answer

The answer of What are some of the problems associated...

Question 7

Some costs associated with anticipated inflation are:

Accepted Answer

A)  menu and shoe- leather costs. 
B)  opportunity and marginal costs. 
C)  outsourcing and a larger trade deficit. 
D)  transaction and settlement costs.

Question 8

When an economics professor quits his job from a university and starts looking for a job in another university, he is:

Accepted Answer

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

Question 9

If Year 1 is the base year, the price index for Year 2 is 105, and the price index for Year 3 is
103. What is the inflation rate in Years 2 and 3? Explain what has happened to the cost of living between Years 1 and 2 and Years 2 and 3.

Accepted Answer

The answer of If Year 1 is the base year,...

Question 10

The labor force participation rate equals:

Accepted Answer

A)  employed / population. 
B)  (labor force) / (population 16 years or older). 
C)  population /(labor force). 
D)  (labor force)/ population.

Question 11

The natural rate of unemployment changes over time.

Accepted Answer

A) True 
 B)False

Question 12

If you expect that the inflation rate is 5 percent and the actual inflation rate turned out to be exactly 3 percent, then:

Accepted Answer

A)  lenders gain. 
B)  borrowers gain. 
C)  both the borrowers and lenders gain. 
D)  neither borrowers nor lenders gain.

Question 13

If you expect that the inflation rate is 5 percent and the inflation actual inflation rate turned out to be exactly 5 percent, then:

Accepted Answer

A)  the inflation rate was fully anticipated and there is no unanticipated inflation. 
B)  the inflation rate was fully unanticipated. 
C)  the anticipated inflation rate equals zero. 
D)  the anticipated and unanticipated inflation rate equals 5 percent.

Question 14

If the number of people classified as unemployed is 50,000 and the number of people classified as employed is 250,000, what is the unemployment rate?

Accepted Answer

A)  8% 
B)  8.7% 
C)  16.67% 
D)  20.0%

Question 15

Recall Application 3, "Social Norms, Unemployment ,and Perceived Happiness," to answer the following questions:
-According to the application, Andrew Clark found that the more an individual was, the aggressive he or she was in looking for a job.

Accepted Answer

A)  in debt; less 
B)  content; more 
C)  lazy; less 
D)  unhappy; more

Question 16

Recall Application 1, "After Growing Sharply, Women's Labor Force Participation Has Leveled Off," to answer the following questions:
-According to the application, the reason why the labor- force participation rate of women has leveled off is because:

Accepted Answer

A)  women have become lazy and got tired of working. 
B)  the wages of women have slowly been declining and women no longer found it worthwhile to work. 
C)  women have been going back to school. 
D)  women can no longer decrease the time they need to spend on housework and other duties.

Question 17

-Refer to Table 6.3. The number of people not in the labor force equals:

Accepted Answer

A)  201.9. 
B)  68.4. 
C)  74.3. 
D)  5.9.

Question 18

-Refer to Table 6.4. The labor- force equals:

Accepted Answer

A)  150.6. 
B)  83.5. 
C)  120.3. 
D)  125.

Question 19

Unanticipated inflation arbitrarily redistributes income because:

Accepted Answer

A)  actual tax revenue decreases and so do government subsidies. 
B)  medical costs rise faster than health insurance premiums. 
C)  people forecast relative prices incorrectly and either gain or lose purchasing power. 
D)  nominal interest rates fall below real interest rates.

Question 20

Suppose that the economy is experiencing a 3 percent unemployment rate when the natural rate of unemployment is 5 percent. Is this unemployment rate sustainable in the long run? Explain.

Accepted Answer

The answer of Suppose that the economy is experiencing a...

Exam 6: Unemployment and Inflation

Mike has just graduated from college and is now looking for a job, but has not yet found one. This causes the unemployment rate to _ and the labor- force participation rate to _.