Question 1

If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar 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

The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is

Accepted Answer

A)  positively sloped. 
B)  negatively sloped. 
C)  vertical. 
D)  horizontal. 
A)  positively sloped. 
B)  negatively sloped. 
C)  vertical. 
D)  horizontal.

Question 3

The U.S. unemployment insurance program

Accepted Answer

A)  increases the amount of time the unemployed spend searching for a job. 
B)  decreases the level of frictional unemployment. 
C)  pays the unemployed a benefit equal to twice the average wage. 
D)  eliminates structural unemployment. 
A)  increases the amount of time the unemployed spend searching for a job. 
B)  decreases the level of frictional unemployment. 
C)  pays the unemployed a benefit equal to twice the average wage. 
D)  eliminates structural unemployment.

Question 4

Explain how the CPI is constructed.

Accepted Answer

The Bureau of Labor statistics surveys 3

Question 5

Upon your graduation from college, you find that the economy is in recession and the unemployment rate is relatively high. Nonetheless, you continue along your career path looking for a new job because

Accepted Answer

A)  the cost of additional education is always higher during recession. 
B)  high unemployment rates do not usually last for very long. 
C)  looking for work is your only option. 
D)  the wages of college graduates do not fall during recession. 
A)  the cost of additional education is always higher during recession. 
B)  high unemployment rates do not usually last for very long. 
C)  looking for work is your only option. 
D)  the wages of college graduates do not fall during recession.

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. 
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

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

Question 8

Between 2013 and 2014, the CPI of a small nation rose from 182 to 185. If household incomes rose by 3% during that period of time, which of the following is true?

Accepted Answer

A)  The purchasing power of household income rose between 2013 and 2014. 
B)  The purchasing power of household income fell between 2013 and 2014. 
C)  The purchasing power of household income remained constant between 2013 and 2014. 
D)  The CPI cannot be used to determine how the purchasing power of household income changes over time. 
A)  The purchasing power of household income rose between 2013 and 2014. 
B)  The purchasing power of household income fell between 2013 and 2014. 
C)  The purchasing power of household income remained constant between 2013 and 2014. 
D)  The CPI cannot be used to determine how the purchasing power of household income changes over time.

Question 9

Table 20-7
  
-Refer to Table 20-7. Suppose that the data in the table above reflect price levels in the economy. What is the inflation rate between 2012 and 2013?

Accepted Answer

A)  2.9% 
B)  3.5% 
C)  4.6% 
D)  5% 
E)  7.5% 
A)  2.9% 
B)  3.5% 
C)  4.6% 
D)  5% 
E)  7.5%

Question 10

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. 
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 11

Table 20-19
  
-Refer to Table 20-19. Looking at the table above, what is the rate of growth of the average price level from 2011 to 2012?

Accepted Answer

A)  1% 
B)  2% 
C)  3% 
D)  4% 
E)  5% 
A)  1% 
B)  2% 
C)  3% 
D)  4% 
E)  5%

Question 12

Monthly expenditures for a family of 4 in 2012 averaged $1,400. In 2013, the cost of the same purchases was $1,500. If 2012 is the base year, what was the CPI in 2013?

Accepted Answer

A)  110 
B)  107 
C)  100 
D)  93 
A)  110 
B)  107 
C)  100 
D)  93

Question 13

Table 20-18
  
-Refer to Table 20-18. Looking at the table above, what is the rate of growth of real average hourly earnings from 2012 to 2013?

Accepted Answer

A)  7.7% 
B)  6.25% 
C)  4% 
D)  -4% 
A)  7.7% 
B)  6.25% 
C)  4% 
D)  -4%

Question 14

Describe how inflation can be costly even if it is anticipated.

Accepted Answer

First, there will be redistribution as s

Question 15

Suppose you obtain a fixed rate mortgage during a period of relatively high inflation. During the next ten years, inflation falls. Are you a winner or a loser due to inflation? Explain why.

Accepted Answer

You would be a loser under this scenario

Question 16

Efficiency wage is another name for the minimum wage.

Accepted Answer

A) True 
 B)False

Question 17

An increase in cyclical unemployment will result in

Accepted Answer

A)  an increase in the natural rate of unemployment. 
B)  an increase in the unemployment rate. 
C)  an increase in structural unemployment. 
D)  a decrease in frictional unemployment. 
A)  an increase in the natural rate of unemployment. 
B)  an increase in the unemployment rate. 
C)  an increase in structural unemployment. 
D)  a decrease in frictional unemployment.

Question 18

Table 20-20
   Salaries in major league baseball have soared over the last 30 to 40 years. Some of the salary increase is due to inflation. The table above reports the consumer price index and the median nominal salary of the New York Yankees for 1989 and 2009.
Source: USA Today Salaries Database, asp.usatoday.com/sports/baseball/salaries/default.aspx
-Refer to Table 20-20. Calculate the real median salary of the New York Yankees in both 1982-1984 dollars and 2009 dollars. Calculate the percentage increase in the median salary of the Yankees from 1989 to 2009 in both nominal terms and in real terms.

Accepted Answer

Real median salary = @#IMG-DLM& × 100.
Real median

Question 19

What are menu costs?

Accepted Answer

A)  the full list of a firm's costs of production 
B)  the costs to a firm of changing prices 
C)  the cost to a household of borrowing money when there is deflation 
D)  the opportunity cost of dining in a restaurant instead of at home 
A)  the full list of a firm's costs of production 
B)  the costs to a firm of changing prices 
C)  the cost to a household of borrowing money when there is deflation 
D)  the opportunity cost of dining in a restaurant instead of at home

Question 20

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

Exam 20: Unemployment and Inflation

If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar has ________.

The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is

The U.S. unemployment insurance program

Explain how the CPI is constructed.

Upon your graduation from college, you find that the economy is in recession and the unemployment rate is relatively high. Nonetheless, you continue along your career path looking for a new job because

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

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.

Between 2013 and 2014, the CPI of a small nation rose from 182 to 185. If household incomes rose by 3% during that period of time, which of the following is true?

Table 20-7 -Refer to Table 20-7. Suppose that the data in the table above reflect price levels in the economy. What is the inflation rate between 2012 and 2013?

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

Table 20-19 -Refer to Table 20-19. Looking at the table above, what is the rate of growth of the average price level from 2011 to 2012?

Monthly expenditures for a family of 4 in 2012 averaged $1,400. In 2013, the cost of the same purchases was $1,500. If 2012 is the base year, what was the CPI in 2013?

Table 20-18 -Refer to Table 20-18. Looking at the table above, what is the rate of growth of real average hourly earnings from 2012 to 2013?

Describe how inflation can be costly even if it is anticipated.

Suppose you obtain a fixed rate mortgage during a period of relatively high inflation. During the next ten years, inflation falls. Are you a winner or a loser due to inflation? Explain why.

Efficiency wage is another name for the minimum wage.

An increase in cyclical unemployment will result in

What are menu costs?

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

If your nominal wage rises more slowly than the price level, we can say your real wage has and the purchasing power of a dollar has .