Question 1

If the CPI was 228 at the end of 2013 and 236 at the end of 2014, what was the inflation rate in 2014?

Accepted Answer

A)  8 percent
B)  236 percent
C)  3.5 percent
D)  3.4 percent
E)  4 percent C

Question 2

If the labour force participation rate is rising and the working-age population is not changing, then the

Accepted Answer

A)  size of the labour force is rising.
B)  number of unemployed people is rising and the size of the labour force is falling.
C)  size of the labour force is falling.
D)  number of unemployed people is falling and the size of the labour force is rising.
E)  number of employed people must be increasing. A

Question 3

Which one of the following people would be counted as unemployed in Canada?

Accepted Answer

A)  Veena is not working, but she is looking for a full-time job.
B)  Kathy has stopped looking for work since she was unable to find a suitable job during a one-month search.
C)  Sharon is a college student with a job.
D)  Christos was laid off from his job a month ago and has not been looking for a new job, as he is waiting for a severance package from his former employer.
E)  Benoit was laid off when his firm closed down two months ago and has not been looking for work, as he is going back to school. A

Question 4

If prices at Wendy's rise, more consumers buy their meals at McDonald's and fewer consumers buy their meals at Wendy's. This is an example of

Accepted Answer

A)  consumers' action to boycott Wendy's.
B)  outlet substitution.
C)  commodity substitution.
D)  new good bias.
E)  quality change bias.

Question 5

In a country with a working-age population of 22 million, 16 million are employed, 2 million are unemployed, and 1 million of the employed are working part-time, half of whom wish to work full-time. The employment-to-population ratio is

Accepted Answer

A)  72.7 percent.
B)  65 percent.
C)  75.5 percent.
D)  57.5 percent.
E)  16 percent.

Question 6

The CPIC

Accepted Answer

A)  does not overcome the source of bias in the CPI.
B)  overcomes the sources of bias in the CPI by eliminating measures of the goods and services with the most volatile prices.
C)  overcomes the sources of bias in the CPI by incorporating substitutions and using current and previous period quantities.
D)  overcomes the sources of bias in the CPI by giving extra weight to the measures of the goods and services with the most volatile prices.
E)  overcomes the sources of bias in the CPI by always using discount store prices.

Question 7

People become unemployed when they

Accepted Answer

A)  retire.
B)  are on maternity leave.
C)  quit working to go to university.
D)  leave university and start seeking work.
E)  become discouraged searchers.

Question 8

Choose the incorrect statement.

Accepted Answer

A)  The outlet substitution bias injects an upward bias into the CPI.
B)  When the quality of a good improves over time and as a result the price rises, the CPI counts the entire price rise as inflation and so overstates inflation.
C)  When relative prices change and people substitute to the lower priced good, the CPI ignores the substitution and the CPI overstates inflation.
D)  The CPI basket is constantly updated to allow for the introduction of new goods.
E)  All of the above statements are incorrect.

Question 9

If the number of discouraged searchers increases, everything else remaining the same, then the

Accepted Answer

A)  unemployment rate will increase.
B)  employment-to-population ratio will decrease.
C)  labour force participation rate will increase.
D)  labour force participation rate will decrease.
E)  employment-to-population ratio will increase.

Question 10

In a country with a working-age population of 30 million, 18 million are employed, 2 million are unemployed, and 2 million of the employed are working part-time, half of whom wish to work full-time. The unemployment rate is

Accepted Answer

A)  10 percent.
B)  9.1 percent.
C)  14.3 percent.
D)  11.1 percent.
E)  2 percent.

Question 11

Counting discouraged searchers as unemployed would

Accepted Answer

A)  not change the measured unemployment rate.
B)  lower the measured unemployment rate.
C)  raise the natural unemployment rate.
D)  raise the full employment rate.
E)  raise the measured unemployment rate.

Question 12

If the economy is at full employment, then

Accepted Answer

A)  the entire population is employed.
B)  the entire labour force is employed.
C)  the only unemployment is frictional unemployment plus discouraged workers.
D)  the unemployment rate is less than 3 percent.
E)  all unemployment arises from normal frictions and structural change.

Question 13

In a recession, typically

Accepted Answer

A)  unemployment rises.
B)  the employment-to-population ratio decreases.
C)  the employment-to-population rate rises.
D)  the labour force participation rate rises.
E)  Both A and B are correct.

Question 14

Use the table below to answer the following questions.
Table 21.3.1
Suppose a simple economy produces three goods only.
The price and output data for some selected years are shown below.
 
-Refer to Table 21.3.1. The reference base period is 2014. The CPI in 2014 is

Accepted Answer

A)  100.
B)  157.
C)  129.
D)  64.
E)  153.

Question 15

Full employment

Accepted Answer

A)  occurs when all unemployment is cyclical and structural.
B)  occurs when all unemployment is frictional and discouraged.
C)  occurs when there is zero unemployment.
D)  occurs when there is zero frictional unemployment.
E)  occurs when there is zero cyclical unemployment.

Question 16

If the CPI was 128 at the end of 2013 and 136 and the end of 2014, what was the inflation rate in 2014?

Accepted Answer

A)  4.2 percent
B)  5.9 percent
C)  6.25 percent
D)  8 percent
E)  9.4 percent

Question 17

Henelyn lost her job as a factory worker when she was replaced by a robotic machine. Now she is looking for a new job. Henelyn is

Accepted Answer

A)  frictionally unemployed.
B)  structurally unemployed.
C)  not unemployed.
D)  cyclically unemployed.
E)  not in the labour force.

Question 18

Nominal GDP is $1,800 and real GDP is $1,600. The GDP deflator is

Accepted Answer

A)  112.5.
B)  88.8.
C)  8.88.
D)  11.25.
E)  1125.

Question 19

Full employment does not mean that there is zero unemployment because

Accepted Answer

A)  some cyclical unemployment is always present.
B)  some frictional and structural unemployment is always present.
C)  business fluctuations are inevitable.
D)  of the existence of discouraged workers.
E)  of unrealistic wage expectations.

Question 20

The working-age population can be divided into two groups:

Accepted Answer

A)  those who are employed and those who are unemployed.
B)  those in the labour force and discouraged workers.
C)  those who work full time and those who work part time.
D)  those in the labour force and those not in the labour force.
E)  those who are over the age of 15 and those who are under the age of 15.

Exam 21: Monitoring Jobs and Inflation