Question 1

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?

Accepted Answer

A)   inflation
B)   discouraged workers
C)   counting people as employed who are working part time, although they would prefer to be working full time
D)   unemployed persons falsely report themselves to be actively looking for a job D

Question 2

The natural rate of unemployment is the amount of unemployment

Accepted Answer

A)   associated with the business cycle.
B)   equal to frictional plus structural unemployment.
C)   that exists when the economy goes into recession.
D)   that exists when the economy is in an expansion. A

Question 3

The inflation rate measures the average prices of goods and services in the economy.

Accepted Answer

A) True 
 B)False  False

Question 4

The percent increase in the CPI from one year to the next is a measure of the

Accepted Answer

A)   GDP deflator.
B)   unemployment rate.
C)   real interest rate.
D)   inflation rate.

Question 5

Real interest rates at times have been negative.Why would anyone lending money agree to a negative real interest rate?

Accepted Answer

The answer of Real interest rates at times have been...

Question 6

If inflationary expectations are increasing,we would expect that the nominal interest rate would also be increasing,holding all else constant.

Accepted Answer

A) True 
 B)False

Question 7

Table 20-9
 
-Refer to Table 20-9.Looking at the table above,real average hourly earnings in 2009 were

Accepted Answer

A)   $9
B)   $9.52
C)   $10
D)   $12.63

Question 8

Table 20-8
  
The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 20-8.The percentage change in real average earnings from 1965 to 2010 equals

Accepted Answer

A)   2.0 percent
B)   19.7 percent.
C)   24.5 percent.
D)   80.3 percent.

Question 9

Which of the following policies would reduce structural unemployment?

Accepted Answer

A)   an increase in the minimum wage
B)   a job retraining program
C)   implementing an unemployment insurance policy
D)   building an on-line job database that helps workers find jobs

Question 10

Suppose the working-age population of a fictional economy falls into the following categories: 90 are retired or homemakers; 60 have full-time employment; 20 have part-time employment; 20 do not have employment,but are actively looking for employment; and 10 would like employment but do not have employment and are not actively looking for employment.The official unemployment rate as calculated by the U.S.Bureau of Labor would equal

Accepted Answer

A)   (20/60)  × 100.
B)   (20/80)  × 100.
C)   (30/80)  × 100.
D)   (20/100)  × 100.

Question 11

Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about

Accepted Answer

A)   one-half to one percentage point.
B)   one to two percentage points.
C)   one quarter percentage point.
D)   one and one-half percentage points.

Question 12

The substitution bias in the consumer price index refers to the idea that consumers ________ the quantity of products they buy in response to price,and the CPI does not reflect this and ________ the cost of the market basket.

Accepted Answer

A)   change; over-estimates
B)   change; under-estimates
C)   do not change; over-estimates
D)   do not change; under-estimates

Question 13

Which of the following would be a consequence of substitution bias in the CPI?

Accepted Answer

A)   Social Security payments would not adequately compensate retired workers for inflation.
B)   Businesses would over-compensate employees for inflation when giving the cost of living rises.
C)   The inflation rate based on the CPI would under-estimate the true level of inflation.
D)   Judges would award child support payments that would not adequately keep up with the true cost of inflation.

Question 14

The consumer price index is the

Accepted Answer

A)   cost of a market basket of goods and services typically consumed in the base year.
B)   cost of a market basket of goods and services typically consumed in the current period.
C)   average of the prices of the goods and services purchased by a typical urban family of four.
D)   average of the prices of new final goods and services produced in the economy over a period of time.

Question 15

Fill in the missing values in the table of data collected in the household survey for December,1996.The working-age population,employment,unemployment,and labor force are measured in thousands.Show your work.

Accepted Answer

The answer of Fill in the missing values in the...

Question 16

An unemployment insurance program has which of the following effects?

Accepted Answer

A)   It decreases the amount of personal income of the unemployed.
B)   It contributes to the severity of a recession or economic downturn.
C)   It increases the amount of time spent searching for a job.
D)   It lowers the overall unemployment rate.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Table 20-5
 
-Refer to Table 20-5.Consider the following values of the consumer price index for 2010 and 2011.The inflation rate for 2011 was equal to

Accepted Answer

A)   215 percent.
B)   21.5 percent.
C)   8.0 percent.
D)   3.9 percent.

Question 19

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?

Accepted Answer

A)   unemployment rate
B)   discouraged-worker ratio
C)   labor force participation rate
D)   the ratio of minimum wage to inflation

Question 20

The unemployment rate equals the number of unemployed divided by the ________,all times 100.

Accepted Answer

A)   number of employed
B)   labor force
C)   working-age population
D)   total population

Exam 20: Unemployment and Inflation