Question 1

Eliminating frictional unemployment would be good for the economy.

Accepted Answer

A) True 
 B)False

Question 2

Table 20-8
  
-Refer to Table 20-8. Suppose that the data in the table above reflect the price levels in the economy. What is the inflation rate in between 2012 and 2013?

Accepted Answer

A)  2% 
B)  5% 
C)  10% 
D)  12% 
E)  20% 
A)  2% 
B)  5% 
C)  10% 
D)  12% 
E)  20%

Question 3

Table 20-10
  
-Refer to Table 20-10. Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2006 is the base year, then what is the CPI for 2013?

Accepted Answer

A)  14.3 
B)  87.5 
C)  114.3 
D)  160 
A)  14.3 
B)  87.5 
C)  114.3 
D)  160

Question 4

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

Workers in Western Europe and Canada are

Question 5

What does the PPI measure?

Accepted Answer

A)  the average change in the prices paid for all goods produced in the economy over a given year 
B)  the average of the prices received by producers of goods and services at all stages of the production process 
C)  the level of production of goods and services generated in the economy in a given year 
D)  the difference between the prices consumers pay for goods and services and the prices producers pay for goods and services 
A)  the average change in the prices paid for all goods produced in the economy over a given year 
B)  the average of the prices received by producers of goods and services at all stages of the production process 
C)  the level of production of goods and services generated in the economy in a given year 
D)  the difference between the prices consumers pay for goods and services and the prices producers pay for goods and services

Question 6

During a deflationary period,

Accepted Answer

A)  the nominal interest rate is less than the real interest rate. 
B)  the real interest rate is less than the nominal interest rate. 
C)  the price level rises. 
D)  the nominal interest rate does not change. 
A)  the nominal interest rate is less than the real interest rate. 
B)  the real interest rate is less than the nominal interest rate. 
C)  the price level rises. 
D)  the nominal interest rate does not change.

Question 7

The cost to firms of changing prices

Accepted Answer

A)  is small even when there is rapid inflation. 
B)  is called a menu cost. 
C)  does not exist if inflation is perfectly anticipated. 
D)  all of the above 
A)  is small even when there is rapid inflation. 
B)  is called a menu cost. 
C)  does not exist if inflation is perfectly anticipated. 
D)  all of the above

Question 8

Which of the following explains why many European countries have unemployment rates that are higher than in the United States?

Accepted Answer

A)  Technological change occurs at a faster rate in Europe, so structural unemployment is higher in Europe. 
B)  European countries offer higher unemployment benefits than the United States. 
C)  Firms in European countries offer employees higher wages and higher benefits than do firms in the United States. 
D)  The minimum wage in Europe is lower than it is in the United States. 
A)  Technological change occurs at a faster rate in Europe, so structural unemployment is higher in Europe. 
B)  European countries offer higher unemployment benefits than the United States. 
C)  Firms in European countries offer employees higher wages and higher benefits than do firms in the United States. 
D)  The minimum wage in Europe is lower than it is in the United States.

Question 9

If the federal government implements programs so that the unemployed are more quickly matched with jobs, then

Accepted Answer

A)  the natural rate of unemployment will increase. 
B)  the natural rate of unemployment will decrease. 
C)  the natural rate of unemployment will not change. 
D)  the natural rate of unemployment could either increase or decrease. 
A)  the natural rate of unemployment will increase. 
B)  the natural rate of unemployment will decrease. 
C)  the natural rate of unemployment will not change. 
D)  the natural rate of unemployment could either increase or decrease.

Question 10

Assume the average annual CPI values for 2012 and 2013 were 207.3 and 215.3, respectively. What was the percent increase in the CPI between these two years?

Accepted Answer

A)  0.96 
B)  1.04 
C)  3.86 
D)  8.0 
A)  0.96 
B)  1.04 
C)  3.86 
D)  8.0

Question 11

The deflation of the 1930s impacted the U.S. economy because it led some consumers to ________ and because it ________.

Accepted Answer

A)  postpone purchases while they waited for prices to fall even lower; increased the burden on borrowers 
B)  demand higher wages in anticipation of prices eventually rising again; increased manufacturing since firms could afford to hire more labor 
C)  borrow more money since money was now cheap; reduced the amount of money consumers would have to pay back on their outstanding loans 
D)  increase purchases to take advantage of the falling prices; increased the burden on lenders 
A)  postpone purchases while they waited for prices to fall even lower; increased the burden on borrowers 
B)  demand higher wages in anticipation of prices eventually rising again; increased manufacturing since firms could afford to hire more labor 
C)  borrow more money since money was now cheap; reduced the amount of money consumers would have to pay back on their outstanding loans 
D)  increase purchases to take advantage of the falling prices; increased the burden on lenders

Question 12

In 2013, Caterpillar laid off employees who produced mining machinery at its South Milwaukee plant. The laid-off employees who were not able to find jobs at another factory due to a permanent decline in demand in the mining industry would be considered

Accepted Answer

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

Question 13

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

Accepted Answer

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

Question 14

The labor force participation rates of women have rapidly increased since 1948.

Accepted Answer

A) True 
 B)False

Question 15

The costs to firms of changing prices are called

Accepted Answer

A)  redistribution costs. 
B)  menu costs. 
C)  anticipation costs. 
D)  money illusion costs. 
A)  redistribution costs. 
B)  menu costs. 
C)  anticipation costs. 
D)  money illusion costs.

Question 16

Nominal income is equal to real income if the CPI is less than 100.

Accepted Answer

A) True 
 B)False

Question 17

If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate is

Accepted Answer

A)  -3%. 
B)  3%. 
C)  6.67%. 
D)  15%. 
A)  -3%. 
B)  3%. 
C)  6.67%. 
D)  15%.

Question 18

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

Question 19

Unemployment caused by a business cycle recession is called cyclical unemployment.

Accepted Answer

A) True 
 B)False

Question 20

The "new product bias" in the consumer price index refers to the idea that

Accepted Answer

A)  consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers. 
B)  consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers. 
C)  consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers. 
D)  new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers. 
A)  consumers switch to new goods when the prices of old goods increase, and the CPI overestimates the cost to consumers. 
B)  consumers switch to old goods when the prices of new goods increase, and the CPI underestimates the cost to consumers. 
C)  consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the cost to consumers. 
D)  new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers.

Exam 20: Unemployment and Inflation

Eliminating frictional unemployment would be good for the economy.

Table 20-8 -Refer to Table 20-8. Suppose that the data in the table above reflect the price levels in the economy. What is the inflation rate in between 2012 and 2013?

Table 20-10 -Refer to Table 20-10. Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2006 is the base year, then what is the CPI for 2013?

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

What does the PPI measure?

During a deflationary period,

The cost to firms of changing prices

Which of the following explains why many European countries have unemployment rates that are higher than in the United States?

If the federal government implements programs so that the unemployed are more quickly matched with jobs, then

Assume the average annual CPI values for 2012 and 2013 were 207.3 and 215.3, respectively. What was the percent increase in the CPI between these two years?

The deflation of the 1930s impacted the U.S. economy because it led some consumers to ________ and because it ________.

In 2013, Caterpillar laid off employees who produced mining machinery at its South Milwaukee plant. The laid-off employees who were not able to find jobs at another factory due to a permanent decline in demand in the mining industry would be considered

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

The labor force participation rates of women have rapidly increased since 1948.

The costs to firms of changing prices are called

Nominal income is equal to real income if the CPI is less than 100.

If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate is

Which of the following policies would reduce structural unemployment?

Unemployment caused by a business cycle recession is called cyclical unemployment.

The "new product bias" in the consumer price index refers to the idea that

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

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

Oligopoly: Firms in Less Competitive Markets

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

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

The deflation of the 1930s impacted the U.S. economy because it led some consumers to and because it .