Question 1

Which of the following describes a situation in which the person is hurt by inflation?

Accepted Answer

A) a retiree whose pension is adjusted for inflation 
B) a person who borrows money during a period when inflation is under-predicted 
C) a person who lends money during a period when inflation is over-predicted 
D) a person paid a fixed income during an inflationary period

Question 2

A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket

Accepted Answer

A) equaled $160 in 1996. 
B) equaled $160 in 1983. 
C) rose 160% from the cost of the market basket in the base year. 
D) rose 60% from the cost of the market basket in the base year.

Question 3

Structural 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 4

Suppose that in 2012,all prices in the economy double and that all wages and salaries have also doubled.In 2012 you

Accepted Answer

A) are worse off than you were in 2011 as you can no longer afford to buy as many goods and services. 
B) are better off than you were in 2011 as your salary is higher than it was in 2011 and you can now buy more goods and services. 
C) are no better off or worse off than you were in 2011 as the purchasing power of your salary has remained the same. 
D) cannot determine whether you are better off or worse off than you were in 2011,because the purchasing power of your salary cannot be determined.

Question 5

Suppose that at the beginning of a loan contract,the real interest rate is 4% and expected inflation is currently 6%.If actual inflation turns out to be 7% over the loan contract period,then

Accepted Answer

A) borrowers gain 1% of the loan value. 
B) lenders gain 1% of the loan value. 
C) borrowers lose 3% of the loan value. 
D) lenders gain 3% of the loan value.

Question 6

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 7

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

Question 8

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 9

Cyclical 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 10

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

Accepted Answer

A) True 
 B)False

Question 11

In September 2011,Bank of America laid off 30,000 employees.The laid-off employees who were not able to find jobs at another bank due to a permanent decline in business in the financial industry would be considered

Accepted Answer

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

Question 12

Suppose that the labor movement has a revival in the United States and the majority of workers join labor unions.As a result we would expect

Accepted Answer

A) the labor force participation rate to fall. 
B) the unemployment rate to fall. 
C) the unemployment rate to rise. 
D) no change in the unemployment rate or labor force participation rate.

Question 13

The producer price index measures the prices that firms

Accepted Answer

A) pay for imported natural resources that go into the production process. 
B) receive for the goods and services they export. 
C) receive for the goods and services they use at all stages of production. 
D) pay for labor,whether or not the labor is foreign or domestic.

Question 14

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

Accepted Answer

A) employed. 
B) unemployed. 
C) not in the labor force. 
D) not in the working-age population.

Question 15

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 16

The real interest rate equals the nominal interest rate ________ the inflation rate.

Accepted Answer

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

Question 17

The Bureau of Labor Statistics does not count discouraged workers as unemployed.Suppose discouraged workers 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 does not...

Question 18

Suppose the labor force stays constant,and the working-age population stays constant,but a greater number of persons who were unemployed become employed.The labor force participation rate will

Accepted Answer

A) increase. 
B) decrease. 
C) remain constant. 
D) not change in a way that can be predicted.

Question 19

If you have trouble finding a job because of a slowdown in the overall economy,we would say that you are

Accepted Answer

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

Question 20

The Bureau of Labor Statistics would categorize a retiree who is not working as

Accepted Answer

A) employed. 
B) unemployed. 
C) a discouraged worker. 
D) out of the labor force.

Exam 13: Unemployment and Inflation