Question 1

The real wage equals the nominal wage ________ the CPI,all times 100.

Accepted Answer

A)  divided by
B)  times
C)  minus
D)  plus A

Question 2

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  True

Question 3

Table 13-1
  Consider the data above for a simple economy.
-Refer to Table 13-1.The labor force participation rate for this simple economy equals

Accepted Answer

A)  (1,000/1,100) × 100.
B)  (1,000/15,000) × 100.
C)  (1,100/15,000) × 100.
D)  (1,100/20,000) × 100. C

Question 4

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 5

During the Great Depression,cyclical unemployment increased as the recession continued.This increase in cyclical unemployment

Accepted Answer

A)  increased the natural rate of unemployment.
B)  decreased the natural rate of unemployment.
C)  had no effect on the natural rate of unemployment.
D)  could have increased or decreased the natural rate of unemployment.

Question 6

Suppose that homemakers are included as employed in the labor force statistics,rather than being counted as out of the labor force.This would

Accepted Answer

A)  increase the measured unemployment rate.
B)  increase the measured labor force participation rate.
C)  decrease the number of persons in the labor force.
D)  decrease the number of persons in the working-age population.

Question 7

If inflation is positive and is perfectly anticipated,

Accepted Answer

A)  those that borrow money lose.
B)  those that lend money lose.
C)  those that hold paper money lose.
D)  no one in the economy loses.

Question 8

If an economy experiences deflation,the real interest rate

Accepted Answer

A)  will be less than the nominal interest rate.
B)  will be negative when the nominal interest rate is positive.
C)  will be greater than the nominal interest rate.
D)  will be equal to the deflation rate,so long as the nominal interest rate is positive.

Question 9

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 10

The GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household.

Accepted Answer

A) True 
 B)False

Question 11

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.

Question 12

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation,but ________ quality increases.This causes the CPI to ________ the cost of the market basket.

Accepted Answer

A)  also;understate
B)  also;overstate
C)  not;understate
D)  not;overstate

Question 13

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 14

Frictional unemployment is the result of

Accepted Answer

A)  a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs.
B)  the search process of matching workers with jobs.
C)  the ups and downs in inflation.
D)  a slowdown in the economy.

Question 15

The unemployment rate is an important economic statistic that can tell us about the health of the economy.If the unemployment rate turns out to be high or higher than anticipated,we would expect

Accepted Answer

A)  it is more likely that an incumbent president will be re-elected.
B)  that stock prices are more likely to fall.
C)  that jobs are less difficult to find.
D)  that investors will be more optimistic about the economy.

Question 16

What are some reasons why the unemployment rate is typically lower in the United States as compared to Canada and some Western European countries?

Accepted Answer

The answer of What are some reasons why the unemployment...

Question 17

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 18

To reduce the bias in the consumer price index,the Bureau of Labor Statistics

Accepted Answer

A)  updates the market basket every two years,rather than every 10 years.
B)  updates the market basket every 10 years,rather than every two years.
C)  incorporates substitutions by consumers when prices of specific products rise rapidly.
D)  incorporates substitutions by consumers when prices of specific products fall rapidly.

Question 19

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 20

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

Accepted Answer

A)  inflation
B)  discouraged workers
C)  people employed in the underground economy
D)  unemployed persons falsely report themselves to be actively looking for a job

Exam 13: Unemployment and Inflation