Question 1

Which of the following people would be counted as unemployed?

Accepted Answer

A) a retired naval officer 
B) a full-time student in high school 
C) a father of preschool children who does not want to work 
D) an inner-city teenager who has given up looking for work after a year of trying 
E) a downhill ski instructor who looks for work during the summer 
A) a retired naval officer 
B) a full-time student in high school 
C) a father of preschool children who does not want to work 
D) an inner-city teenager who has given up looking for work after a year of trying 
E) a downhill ski instructor who looks for work during the summer

Question 2

In periods of high inflation,

Accepted Answer

A) people want to hold as much money as possible 
B) the purchasing power of money is decreasing 
C) nobody wants to work and earn income 
D) low nominal interest rates are likely to result 
E) nobody wants to buy goods and services 
A) people want to hold as much money as possible 
B) the purchasing power of money is decreasing 
C) nobody wants to work and earn income 
D) low nominal interest rates are likely to result 
E) nobody wants to buy goods and services

Question 3

Suppose U = the number of adults who are unemployed; E = the number of adults who are employed; and NLF = the number of adults not in the labor force. Which expression would equal the labor force participation rate?

Accepted Answer

A) U/(U + 
E)  
B) E/(U + 
E)  
C) U/(U + E + NLF) 
D) E/(U + E + NLF) 
E) (U + 
E) /(U + E + NLF) 
A) U/(U + 
E)  
B) E/(U + 
E)  
C) U/(U + E + NLF) 
D) E/(U + E + NLF) 
E) (U + 
E) /(U + E + NLF)

Question 4

In times of rapid inflation,

Accepted Answer

A) money loses its use as a store of value 
B) money becomes an attractive store of wealth 
C) people postpone purchases as long as possible 
D) people spend less in transactions costs 
E) people tend to save more money 
A) money loses its use as a store of value 
B) money becomes an attractive store of wealth 
C) people postpone purchases as long as possible 
D) people spend less in transactions costs 
E) people tend to save more money

Question 5

Inmates from the county prison who are on work release are counted as part of the labor force.

Accepted Answer

A) True 
 B)False

Question 6

An increase in unemployment benefits is likely to do which of the following?

Accepted Answer

A) reduce a person's incentive to look for work 
B) reduce the opportunity cost of being unemployed 
C) provide a better safety net for employed families 
D) make it more difficult for people to search longer for jobs appropriate to their skill levels 
E) increase the need to accept the first job available after becoming unemployed 
A) reduce a person's incentive to look for work 
B) reduce the opportunity cost of being unemployed 
C) provide a better safety net for employed families 
D) make it more difficult for people to search longer for jobs appropriate to their skill levels 
E) increase the need to accept the first job available after becoming unemployed

Question 7

Demand-pull inflation is worse for an economy than cost-push inflation because in addition to higher prices, demand-pull inflation also reduces employment.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true about inflation?

Accepted Answer

A) Inflation promotes social harmony by uniting people against the government. 
B) Inflation is more damaging if it is unanticipated. 
C) Accurate anticipation of inflation is possible for everyone who is well informed about economic events. 
D) Those who lend money at a rate above the rate of inflation suffer economic losses. 
E) If people accurately anticipate inflation, their actions will prevent it. 
A) Inflation promotes social harmony by uniting people against the government. 
B) Inflation is more damaging if it is unanticipated. 
C) Accurate anticipation of inflation is possible for everyone who is well informed about economic events. 
D) Those who lend money at a rate above the rate of inflation suffer economic losses. 
E) If people accurately anticipate inflation, their actions will prevent it.

Question 9

Consider an economy with an adult population of 100, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The labor force participation rate is

Accepted Answer

A) 100 percent 
B) 60 percent 
C) 50 percent 
D) 40 percent 
E) 10 percent 
A) 100 percent 
B) 60 percent 
C) 50 percent 
D) 40 percent 
E) 10 percent

Question 10

Which of the following factors makes the official unemployment rate an overstatement of the actual level of unemployment in the economy?

Accepted Answer

A) exclusion of discouraged workers 
B) inclusion of those only working part-time 
C) inclusion of those who are overqualified for their current jobs 
D) exclusion of those who work at a family business 
E) inclusion of those who pretend to look for work in order to qualify for welfare programs 
A) exclusion of discouraged workers 
B) inclusion of those only working part-time 
C) inclusion of those who are overqualified for their current jobs 
D) exclusion of those who work at a family business 
E) inclusion of those who pretend to look for work in order to qualify for welfare programs

Question 11

Suppose you received a 4 percent increase in your nominal wage. Over the year, inflation runs about 7 percent. Which of the following is true?

Accepted Answer

A) Your real wage increased. 
B) Both the nominal and real wages increased. 
C) Both your nominal and real wages decreased. 
D) Although your nominal wage fell, your real wage increased. 
E) Although your nominal wage rose, your real wage decreased. 
A) Your real wage increased. 
B) Both the nominal and real wages increased. 
C) Both your nominal and real wages decreased. 
D) Although your nominal wage fell, your real wage increased. 
E) Although your nominal wage rose, your real wage decreased.

Question 12

An increase in the supply of loanable funds, other things constant, will increase the interest rate.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a cost of unemployment?

Accepted Answer

A) Unemployed individuals suffer a loss of income. 
B) Unemployed individuals are more likely to have emotional or psychological problems. 
C) Unemployed individuals can lose their job skills over time. 
D) Unemployment causes production to decrease from what it could be. 
E) The opportunity cost of unemployment is a higher inflation rate. 
A) Unemployed individuals suffer a loss of income. 
B) Unemployed individuals are more likely to have emotional or psychological problems. 
C) Unemployed individuals can lose their job skills over time. 
D) Unemployment causes production to decrease from what it could be. 
E) The opportunity cost of unemployment is a higher inflation rate.

Question 14

The nominal interest rate is determined in the market for loanable funds.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following types of unemployment is the hardest to reduce?

Accepted Answer

A) cyclical 
B) structural 
C) voluntary 
D) involuntary 
E) speculative 
A) cyclical 
B) structural 
C) voluntary 
D) involuntary 
E) speculative

Question 16

A discouraged worker is one who

Accepted Answer

A) is underqualified for his current job 
B) dislikes his current job but is afraid to quit 
C) drops out of the labor force because he cannot find a job 
D) quits his job because the possibility of advancement was very low 
E) is overqualified for his current job 
A) is underqualified for his current job 
B) dislikes his current job but is afraid to quit 
C) drops out of the labor force because he cannot find a job 
D) quits his job because the possibility of advancement was very low 
E) is overqualified for his current job

Question 17

The real interest rate can be expressed as the

Accepted Answer

A) nominal interest rate minus the real interest rate 
B) inflation rate minus the nominal interest rate 
C) nominal interest rate minus the inflation rate 
D) inflation rate minus the real interest rate 
E) nominal interest rate plus the inflation rate 
A) nominal interest rate minus the real interest rate 
B) inflation rate minus the nominal interest rate 
C) nominal interest rate minus the inflation rate 
D) inflation rate minus the real interest rate 
E) nominal interest rate plus the inflation rate

Question 18

Assuming the total population is 150 million, the labor force is 100 million, and 94 million workers are employed, the unemployment rate is

Accepted Answer

A) 4 percent 
B) 8 percent 
C) 6 percent 
D) 10 percent 
E) 15 percent 
A) 4 percent 
B) 8 percent 
C) 6 percent 
D) 10 percent 
E) 15 percent

Question 19

Seasonal unemployment results from

Accepted Answer

A) unrealistic expectations about the availability of employment 
B) being in the wrong geographical location 
C) taking the time to find the best job 
D) decreases in demand for labor at certain times of the year 
E) periodic increases in business activity 
A) unrealistic expectations about the availability of employment 
B) being in the wrong geographical location 
C) taking the time to find the best job 
D) decreases in demand for labor at certain times of the year 
E) periodic increases in business activity

Question 20

Demand-pull inflation is associated with

Accepted Answer

A) decreasing aggregate demand and lower unemployment 
B) increasing aggregate demand and lower unemployment 
C) decreasing aggregate demand and greater unemployment 
D) increasing aggregate demand and greater unemployment 
E) a rising price level caused by a shift in either aggregate demand or aggregate supply 
A) decreasing aggregate demand and lower unemployment 
B) increasing aggregate demand and lower unemployment 
C) decreasing aggregate demand and greater unemployment 
D) increasing aggregate demand and greater unemployment 
E) a rising price level caused by a shift in either aggregate demand or aggregate supply

Exam 8: Unemployment and Inflation

Which of the following people would be counted as unemployed?

In periods of high inflation,

Suppose U = the number of adults who are unemployed; E = the number of adults who are employed; and NLF = the number of adults not in the labor force. Which expression would equal the labor force participation rate?

In times of rapid inflation,

Inmates from the county prison who are on work release are counted as part of the labor force.

An increase in unemployment benefits is likely to do which of the following?

Demand-pull inflation is worse for an economy than cost-push inflation because in addition to higher prices, demand-pull inflation also reduces employment.

Which of the following is true about inflation?

Consider an economy with an adult population of 100, 50 of whom hold jobs, 10 of whom are looking for work, and 15 of whom are retired. The labor force participation rate is

Which of the following factors makes the official unemployment rate an overstatement of the actual level of unemployment in the economy?

Suppose you received a 4 percent increase in your nominal wage. Over the year, inflation runs about 7 percent. Which of the following is true?

An increase in the supply of loanable funds, other things constant, will increase the interest rate.

Which of the following is not a cost of unemployment?

The nominal interest rate is determined in the market for loanable funds.

Which of the following types of unemployment is the hardest to reduce?

A discouraged worker is one who

The real interest rate can be expressed as the

Assuming the total population is 150 million, the labor force is 100 million, and 94 million workers are employed, the unemployment rate is

Seasonal unemployment results from

Demand-pull inflation is associated with

The Art and Science of Economic Analysis

Understanding Graphs-Appendix

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Productivity and Growth

Aaggregate Expenditure and Agregate Demand

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

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