Question 1

If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________.

Accepted Answer

A)  fallen; fallen 
B)  fallen; risen 
C)  risen; risen 
D)  risen; fallen 
A)  fallen; fallen 
B)  fallen; risen 
C)  risen; risen 
D)  risen; fallen

Question 2

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

Question 3

The labor force participation rates of men have gradually increased since 1948.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would be the best measure of the cost of living?

Accepted Answer

A)  real GDP 
B)  real GDP per person 
C)  GDP deflator 
D)  consumer price index 
A)  real GDP 
B)  real GDP per person 
C)  GDP deflator 
D)  consumer price index

Question 5

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause

Accepted Answer

A)  the unemployment rate to decrease. 
B)  the labor force participation rate to decrease. 
C)  the number of discouraged workers to increase. 
D)  no change in the unemployment rate. 
A)  the unemployment rate to decrease. 
B)  the labor force participation rate to decrease. 
C)  the number of discouraged workers to increase. 
D)  no change in the unemployment rate.

Question 6

The unemployment rate is higher with a minimum wage law than it would be without a minimum wage law.

Accepted Answer

A) True 
 B)False

Question 7

Article Summary
According to the Bureau of Labor Statistics, the unemployment rate fell from 7.4 percent in July 2013 to 7.3 percent in August, and at the same time the labor force participation rate fell to its lowest level in 35 years, from 63.4 percent to 63.2 percent. The decrease in the labor force participation rate was due to a decline in the size of the workforce of about 300,000 people. A large portion of the job growth in August was in the food service and retail sectors, areas which typically account for part-time and lower-paying jobs. On a brighter note, the average number of hours worked per week rose slightly, as did average hourly earnings and temporary employment.
Source: Peter Coy, "Not Looking for Work: Labor-Force Participation Hits 35-Year Low," Bloomberg Businessweek, September 6, 2013.
-Refer to the Article Summary. Explain how the labor force declining by 300,000 people could have led to the decrease in the unemployment rate.

Accepted Answer

The labor force is calculated as the sum

Question 8

Suppose 180,000 people are employed, 20,000 people are unemployed, the working-age population is 250,000, and 50,000 people are out of the labor force. Calculate the unemployment rate.

Accepted Answer

The unemployment rate is calculated as:

Question 9

The PPI is the

Accepted Answer

A)  price parity index. 
B)  prime producer index. 
C)  producer price index. 
D)  production performance indicator. 
A)  price parity index. 
B)  prime producer index. 
C)  producer price index. 
D)  production performance indicator.

Question 10

Inflation redistributes income to a greater extent when the inflation is unanticipated compared to when the inflation is anticipated.

Accepted Answer

A) True 
 B)False

Question 11

With the exception of during recessions, workers in Canada are eligible for unemployment benefits for about twice as long a period of time as workers in the United States. As a result,

Accepted Answer

A)  the average duration of unemployment is longer in the United States than in Canada. 
B)  the unemployment rate in Canada is usually higher than in the United States. 
C)  the opportunity cost of job search in Canada is lower than in the United States. 
D)  frictional unemployment is higher, on average, in the United States than in Canada. 
A)  the average duration of unemployment is longer in the United States than in Canada. 
B)  the unemployment rate in Canada is usually higher than in the United States. 
C)  the opportunity cost of job search in Canada is lower than in the United States. 
D)  frictional unemployment is higher, on average, in the United States than in Canada.

Question 12

Which of the following describes actual trends in the U.S. labor force participation rate?

Accepted Answer

A)  The labor force participation rate of adult men has risen since 1950. 
B)  The labor force participation rate of adult women has fallen since 1950. 
C)  The labor force participation rate of adult men not in school, but too young to retire has risen since 1950. 
D)  The labor force participation rate of adult women has risen since 1950. 
E)  The labor force participation rate of all adults has fallen since 1950. 
A)  The labor force participation rate of adult men has risen since 1950. 
B)  The labor force participation rate of adult women has fallen since 1950. 
C)  The labor force participation rate of adult men not in school, but too young to retire has risen since 1950. 
D)  The labor force participation rate of adult women has risen since 1950. 
E)  The labor force participation rate of all adults has fallen since 1950.

Question 13

There are no costs to inflation if it is fully anticipated.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following individuals would be most negatively affected by anticipated inflation?

Accepted Answer

A)  a retired railroad engineer who receives a fixed income payment every month 
B)  a union contractor whose pay is adjusted based on changes in the CPI 
C)  a full-time employee at a pizza parlor who makes more than the minimum wage 
D)  a student who borrows $10,000 at a nominal interest rate of 5% to finance educational expenses 
A)  a retired railroad engineer who receives a fixed income payment every month 
B)  a union contractor whose pay is adjusted based on changes in the CPI 
C)  a full-time employee at a pizza parlor who makes more than the minimum wage 
D)  a student who borrows $10,000 at a nominal interest rate of 5% to finance educational expenses

Question 15

The producer price index tracks the prices firms receive for goods and services at all stages of production.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following would reduce the labor force participation rate, all else equal?

Accepted Answer

A)  an increase in the number of people in the labor force 
B)  an increase in the unemployment rate 
C)  a decrease in the unemployment rate 
D)  an increase in the working-age population 
A)  an increase in the number of people in the labor force 
B)  an increase in the unemployment rate 
C)  a decrease in the unemployment rate 
D)  an increase in the working-age population

Question 17

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. 
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 18

What are the three main kinds of unemployment?

Accepted Answer

A)  frictional, seasonal, and cyclical 
B)  temporary, permanent, and volunteer 
C)  cyclical, structural, and temporary 
D)  structural, frictional, and cyclical 
A)  frictional, seasonal, and cyclical 
B)  temporary, permanent, and volunteer 
C)  cyclical, structural, and temporary 
D)  structural, frictional, and cyclical

Question 19

Currently, the base year for the CPI is the average of prices in the years 1982 to 1984.

Accepted Answer

A) True 
 B)False

Question 20

After the recession of 2007-2009, the unemployment rate peaked at 10.0 percent in October 2009. Eighteen months later, it had

Accepted Answer

A)  dropped by 50 percent. 
B)  declined by only 1 percentage point. 
C)  remained at 10.1 percent. 
D)  fallen to the natural rate of unemployment. 
A)  dropped by 50 percent. 
B)  declined by only 1 percentage point. 
C)  remained at 10.1 percent. 
D)  fallen to the natural rate of unemployment.

Exam 20: Unemployment and Inflation

If your nominal wage rises faster than the price level, we can say your real wage has ________ and the purchasing power of your income has ________.

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

The labor force participation rates of men have gradually increased since 1948.

Which of the following would be the best measure of the cost of living?

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause

The unemployment rate is higher with a minimum wage law than it would be without a minimum wage law.

Suppose 180,000 people are employed, 20,000 people are unemployed, the working-age population is 250,000, and 50,000 people are out of the labor force. Calculate the unemployment rate.

The PPI is the

Inflation redistributes income to a greater extent when the inflation is unanticipated compared to when the inflation is anticipated.

With the exception of during recessions, workers in Canada are eligible for unemployment benefits for about twice as long a period of time as workers in the United States. As a result,

Which of the following describes actual trends in the U.S. labor force participation rate?

There are no costs to inflation if it is fully anticipated.

Which of the following individuals would be most negatively affected by anticipated inflation?

The producer price index tracks the prices firms receive for goods and services at all stages of production.

Which of the following would reduce the labor force participation rate, all else equal?

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

What are the three main kinds of unemployment?

Currently, the base year for the CPI is the average of prices in the years 1982 to 1984.

After the recession of 2007-2009, the unemployment rate peaked at 10.0 percent in October 2009. Eighteen months later, it had

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

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Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

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Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

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Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

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Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

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If your nominal wage rises faster than the price level, we can say your real wage has and the purchasing power of your income has .