Question 1

Which of the following do not suffer the costs of inflation?

Accepted Answer

A)  persons on fixed incomes 
B)  persons whose incomes rise more rapidly than inflation 
C)  firms that have to devote more time and labor to raising prices 
D)  an investor that has to pay higher taxes because of the inflation 
A)  persons on fixed incomes 
B)  persons whose incomes rise more rapidly than inflation 
C)  firms that have to devote more time and labor to raising prices 
D)  an investor that has to pay higher taxes because of the inflation

Question 2

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

Accepted Answer

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

Question 3

The short-term unemployment arising from the process of matching workers with jobs is called

Accepted Answer

A)  frictional unemployment. 
B)  structural unemployment. 
C)  cyclical unemployment. 
D)  seasonal unemployment. 
E)  unnatural unemployment. 
A)  frictional unemployment. 
B)  structural unemployment. 
C)  cyclical unemployment. 
D)  seasonal unemployment. 
E)  unnatural unemployment.

Question 4

Housing is the largest component of the U.S. CPI market basket.

Accepted Answer

A) True 
 B)False

Question 5

You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. The CPI over that year rises from 180 to 200. What is the real interest rate you are paying?

Accepted Answer

A)  15% 
B)  5% 
C)  -1.1% 
D)  -6.1% 
A)  15% 
B)  5% 
C)  -1.1% 
D)  -6.1%

Question 6

If the BLS counted persons that are on active military service in the totals for employment, the labor force, or the working-age population, this would

Accepted Answer

A)  decrease the measured unemployment rate. 
B)  decrease 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)  decrease the measured unemployment rate. 
B)  decrease 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 labor force participation rate equals the

Accepted Answer

A)  (number of employed divided by the labor force) × 100. 
B)  (labor force divided by the number of people not in the labor force) × 100. 
C)  (labor force divided by working-age population) × 100. 
D)  (labor force divided by the total population) × 100. 
A)  (number of employed divided by the labor force) × 100. 
B)  (labor force divided by the number of people not in the labor force) × 100. 
C)  (labor force divided by working-age population) × 100. 
D)  (labor force divided by the total population) × 100.

Question 8

When the labor market is at full employment

Accepted Answer

A)  there is only cyclical unemployment in the economy. 
B)  there is only structural unemployment in the economy. 
C)  the unemployment rate is 0%. 
D)  there is no cyclical unemployment in the economy. 
A)  there is only cyclical unemployment in the economy. 
B)  there is only structural unemployment in the economy. 
C)  the unemployment rate is 0%. 
D)  there is no cyclical unemployment in the economy.

Question 9

An advantage of the household survey over the establishment survey of the labor market is that the household survey

Accepted Answer

A)  is based on actual payrolls, rather than on unverified answers. 
B)  includes the number of self-employed persons. 
C)  includes the number of discouraged workers. 
D)  omits persons employed at newly opened firms. 
A)  is based on actual payrolls, rather than on unverified answers. 
B)  includes the number of self-employed persons. 
C)  includes the number of discouraged workers. 
D)  omits persons employed at newly opened firms.

Question 10

Which of the following statements is true about the U.S. economy?

Accepted Answer

A)  Each year, many new jobs are created, but few existing jobs are destroyed, and the unemployed find jobs quickly. 
B)  Each year, few new jobs are created, but few existing jobs are destroyed, keeping unemployment low. 
C)  Each year, many new jobs are created and many existing jobs are destroyed. 
D)  Each year few jobs are created, and therefore it takes the unemployed a long time to find a new job. 
A)  Each year, many new jobs are created, but few existing jobs are destroyed, and the unemployed find jobs quickly. 
B)  Each year, few new jobs are created, but few existing jobs are destroyed, keeping unemployment low. 
C)  Each year, many new jobs are created and many existing jobs are destroyed. 
D)  Each year few jobs are created, and therefore it takes the unemployed a long time to find a new job.

Question 11

The consumer price index is the

Accepted Answer

A)  cost of a market basket of goods and services typically consumed in the base year. 
B)  cost of a market basket of goods and services typically consumed in the current period. 
C)  average of the prices of the goods and services purchased by a typical urban family of four. 
D)  average of the prices of new final goods and services produced in the economy over a period of time. 
A)  cost of a market basket of goods and services typically consumed in the base year. 
B)  cost of a market basket of goods and services typically consumed in the current period. 
C)  average of the prices of the goods and services purchased by a typical urban family of four. 
D)  average of the prices of new final goods and services produced in the economy over a period of time.

Question 12

Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing?

Accepted Answer

A)  cyclical 
B)  structural 
C)  frictional 
D)  Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force. 
A)  cyclical 
B)  structural 
C)  frictional 
D)  Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force.

Question 13

Labor unions cause unemployment because the union contract wage is set

Accepted Answer

A)  below the market wage, causing a shortage of labor. 
B)  below the market wage, causing a surplus of labor. 
C)  above the market wage, causing a surplus of labor. 
D)  above the market wage, causing a shortage of labor. 
A)  below the market wage, causing a shortage of labor. 
B)  below the market wage, causing a surplus of labor. 
C)  above the market wage, causing a surplus of labor. 
D)  above the market wage, causing a shortage of labor.

Question 14

Table 20-15
  
-Refer to Table 20-15. Looking at the table above, real average hourly earnings in 2011 were

Accepted Answer

A)  $9. 
B)  $9.52. 
C)  $10. 
D)  $12.63. 
A)  $9. 
B)  $9.52. 
C)  $10. 
D)  $12.63.

Question 15

Table 20-14
   The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010.
-Refer to Table 20-14. The percentage change in real average earnings from 1965 to 2010 equals

Accepted Answer

A)  2.0 percent. 
B)  19.7 percent. 
C)  24.5 percent. 
D)  80.3 percent. 
A)  2.0 percent. 
B)  19.7 percent. 
C)  24.5 percent. 
D)  80.3 percent.

Question 16

Real interest rates at times have been negative. Why would anyone lending money agree to a negative real interest rate?

Accepted Answer

The lender did not agree to a negative r

Question 17

By offering training to workers whose firms laid them off because of competition from foreign firms, the federal government is attempting to reduce

Accepted Answer

A)  frictional unemployment. 
B)  structural unemployment. 
C)  cyclical unemployment. 
D)  seasonal unemployment. 
E)  unnatural unemployment. 
A)  frictional unemployment. 
B)  structural unemployment. 
C)  cyclical unemployment. 
D)  seasonal unemployment. 
E)  unnatural unemployment.

Question 18

What is the natural rate of unemployment, and what types of unemployment constitute the natural rate of unemployment?

Accepted Answer

The natural rate of unemployment is the

Question 19

If the number of unemployed workers is 200 million, and the number in the labor force is 500 million, what is the unemployment rate?

Accepted Answer

A)  0.4% 
B)  4% 
C)  14% 
D)  40% 
A)  0.4% 
B)  4% 
C)  14% 
D)  40%

Question 20

Suppose you lend $1,000 at an interest rate of 10 percent over the next year. If the expected real interest rate at the beginning of the loan contract is 4 percent, then what rate of inflation over the upcoming year would be most beneficial to you as the lender? An inflation rate

Accepted Answer

A)  equal to 0 percent. 
B)  greater than 6 percent. 
C)  equal to 6 percent. 
D)  equal to 4 percent. 
A)  equal to 0 percent. 
B)  greater than 6 percent. 
C)  equal to 6 percent. 
D)  equal to 4 percent.

Exam 20: Unemployment and Inflation

Which of the following do not suffer the costs of inflation?

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

The short-term unemployment arising from the process of matching workers with jobs is called

Housing is the largest component of the U.S. CPI market basket.

You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. The CPI over that year rises from 180 to 200. What is the real interest rate you are paying?

If the BLS counted persons that are on active military service in the totals for employment, the labor force, or the working-age population, this would

The labor force participation rate equals the

When the labor market is at full employment

An advantage of the household survey over the establishment survey of the labor market is that the household survey

Which of the following statements is true about the U.S. economy?

The consumer price index is the

Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing?

Labor unions cause unemployment because the union contract wage is set

Table 20-15 -Refer to Table 20-15. Looking at the table above, real average hourly earnings in 2011 were

Table 20-14 The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. -Refer to Table 20-14. The percentage change in real average earnings from 1965 to 2010 equals

Real interest rates at times have been negative. Why would anyone lending money agree to a negative real interest rate?

By offering training to workers whose firms laid them off because of competition from foreign firms, the federal government is attempting to reduce

What is the natural rate of unemployment, and what types of unemployment constitute the natural rate of unemployment?

If the number of unemployed workers is 200 million, and the number in the labor force is 500 million, what is the unemployment rate?

Suppose you lend $1,000 at an interest rate of 10 percent over the next year. If the expected real interest rate at the beginning of the loan contract is 4 percent, then what rate of inflation over the upcoming year would be most beneficial to you as the lender? An inflation rate

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

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