Question 1

The unemployment rate in the United States is typically lower than in Western Europe because the United States has tougher requirements for the unemployed to receive government payments.

Accepted Answer

A) True 
 B)False

Question 2

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.

Question 3

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.

Question 4

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.

Question 5

People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering

Accepted Answer

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

Question 6

Describe how a lender can lose during inflation if the inflation is unanticipated and the loan is a fixed-interest-rate loan. How would a variable-interest-rate loan (one that adjusts over the contract period) eliminate these loses?

Accepted Answer

The answer of Describe how a lender can lose during...

Question 7

In April 2017, the U.S. unemployment rate was highest for

Accepted Answer

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

Question 8

If inflation increases unexpectedly, then

Accepted Answer

A)  borrowers pay a higher real interest rate than they expected. 
B)  lenders receive a lower real interest rate than they expected. 
C)  lenders gain and borrowers gain. 
D)  neither borrowers nor lenders lose.

Question 9

During the month of May, 10 million workers moved from being classified as "unemployed" to being classified as "employed." As a result

Accepted Answer

A)  the unemployment rate rose. 
B)  the labor force participation rate fell. 
C)  the unemployment rate fell. 
D)  the labor force participation rate rose.

Question 10

You earned $30,000 in 2009, and your salary rose to $80,000 in 2018. If the CPI rose from 82 to 202 between 2009 and 2018, which of the following is true?

Accepted Answer

A)  There was deflation between 2009 and 2018. 
B)  The purchasing power of your salary fell between 2009 and 2018. 
C)  The purchasing power of your salary remained constant between 2009 and 2018. 
D)  The purchasing power of your salary increased between 2009 and 2018.

Question 11

When the actual inflation rate turns out to be greater than the expected inflation rate, who gains-the borrower or the lender-and who loses? Explain why.

Accepted Answer

The answer of When the actual inflation rate turns out...

Question 12

Inflation that is ________ than what is expected benefits ________ and hurts ________.

Accepted Answer

A)  less; lenders; borrowers 
B)  less; borrowers; lenders 
C)  greater; lenders; borrowers 
D)  greater; lenders; no one

Question 13

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.

Question 14

The Bureau of Labor Statistics counts as employed people who work part-time, but would prefer to work full-time. Suppose the people who had part-time jobs, but wanted full-time jobs, were counted as unemployed. Explain how the unemployment rate and the labor force participation rate would change.

Accepted Answer

The answer of The Bureau of Labor Statistics counts as...

Question 15

Since 1948, the labor force participation rate for adult men has ________ and for adult women has ________.

Accepted Answer

A)  increased; increased 
B)  increased; decreased 
C)  decreased; increased 
D)  decreased; decreased

Question 16

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

Accepted Answer

The answer of Why does the substitution bias cause the...

Question 17

You agree to lend $1,000 for one year at a nominal interest rate of 10%. You anticipate that inflation will be 4% over that year. If inflation is instead 3% over that year, which of the following is true?

Accepted Answer

A)  The real interest rate you earn on your money is lower than you expected. 
B)  The purchasing power of the money that will be repaid to you will be lower than you expected. 
C)  The person who borrowed the $1,000 will be worse off as a result of the unanticipated decrease in inflation. 
D)  The real interest rate you earn on your money will be negative.

Question 18

Which of the following is an example of a worker experiencing frictional unemployment?

Accepted Answer

A)  A worker quits his job at the U.S. Post Office to find more interesting work. 
B)  A computer programmer loses her job because it is outsourced to India. 
C)  An employee is laid off because the economy is suffering a recession. 
D)  A United Airlines pilot loses her job because of lack of demand for air travel.

Question 19

What is the difference between the nominal interest rate and the real interest rate?

Accepted Answer

The answer of What is the difference between the nominal...

Question 20

If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force?

Accepted Answer

A)  1 million 
B)  20 million 
C)  475 million 
D)  481 million

Exam 20: Unemployment and Inflation