Question 1

Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

Accepted Answer

A) Your real wage increased. 
B) Your nominal wage decreased. 
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) Your nominal wage decreased. 
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 2

Some economists have argued that inflation during the 1970s contributed to the U.S. economy's relatively slow growth rate. What is the basis for this view?

Accepted Answer

A) Inflation usually lowers employment, thus slowing growth. 
B) If inflation is anticipated, it is particularly harmful because cost of living increases are built into wage settlements, which only worsens the problem. 
C) High and variable inflation rates increased uncertainty, thus making business decisions more difficult. 
D) Lenders were less interested in making short-term loans than in making long-term loans. 
E) Inflation during the 1970s created increased activity on Wall Street, which drew funds that could have been used for truly productive purposes. 
A) Inflation usually lowers employment, thus slowing growth. 
B) If inflation is anticipated, it is particularly harmful because cost of living increases are built into wage settlements, which only worsens the problem. 
C) High and variable inflation rates increased uncertainty, thus making business decisions more difficult. 
D) Lenders were less interested in making short-term loans than in making long-term loans. 
E) Inflation during the 1970s created increased activity on Wall Street, which drew funds that could have been used for truly productive purposes.

Question 3

Suppose the price levels in four successive years are 100, 120, 133, and 140. Which of the following is true?

Accepted Answer

A) The economy is experiencing hyperinflation. 
B) The economy is experiencing deflation. 
C) The economy is experiencing inflation. 
D) The economy is experiencing increasing inflation. 
E) The economy is experiencing reflation. 
A) The economy is experiencing hyperinflation. 
B) The economy is experiencing deflation. 
C) The economy is experiencing inflation. 
D) The economy is experiencing increasing inflation. 
E) The economy is experiencing reflation.

Question 4

If two parties to a loan contract agree that the lender should earn an 8 percent increase in purchasing power as a result of a loan, and the inflation rate is 5 percent, what is the nominal interest rate?

Accepted Answer

A) 13 percent 
B) 8 percent 
C) 5 percent 
D) 3 percent 
E) 1 percent 
A) 13 percent 
B) 8 percent 
C) 5 percent 
D) 3 percent 
E) 1 percent

Question 5

The "long-term unemployed" are those who are unemployed for:

Accepted Answer

A) 8 weeks or longer 
B) 12 weeks or longer 
C) 18 weeks or longer 
D) 27 weeks or longer 
E) 52 weeks or longer 
A) 8 weeks or longer 
B) 12 weeks or longer 
C) 18 weeks or longer 
D) 27 weeks or longer 
E) 52 weeks or longer

Question 6

Hyperinflation refers to a situation in which

Accepted Answer

A) prices are rising extremely rapidly 
B) prices are falling extremely rapidly 
C) the price level is extremely high 
D) the price level is extremely low 
E) the price level is negative 
A) prices are rising extremely rapidly 
B) prices are falling extremely rapidly 
C) the price level is extremely high 
D) the price level is extremely low 
E) the price level is negative

Question 7

Which of the following statements about unemployment is true?

Accepted Answer

A) There is only one kind of unemployment. 
B) Some unemployment exists even when the economy is healthy and growing. 
C) Unemployment and inflation are not related. 
D) People who are willing and able to work but have given up the search for a job are considered unemployed. 
E) Voluntary unemployment refers to a situation in which people who really do not want to work only pretend to look for jobs. 
A) There is only one kind of unemployment. 
B) Some unemployment exists even when the economy is healthy and growing. 
C) Unemployment and inflation are not related. 
D) People who are willing and able to work but have given up the search for a job are considered unemployed. 
E) Voluntary unemployment refers to a situation in which people who really do not want to work only pretend to look for jobs.

Question 8

The official unemployment rate disguises the extent of the unemployment problem because

Accepted Answer

A) children are not counted as unemployed 
B) retired persons are not counted as unemployed 
C) full-time students are not counted as unemployed 
D) discouraged workers are counted as unemployed 
E) people overqualified for their current job are not considered unemployed 
A) children are not counted as unemployed 
B) retired persons are not counted as unemployed 
C) full-time students are not counted as unemployed 
D) discouraged workers are counted as unemployed 
E) people overqualified for their current job are not considered unemployed

Question 9

Since 1980, a country that has experienced deflation is

Accepted Answer

A) the U.S. 
B) France 
C) Germany 
D) Japan 
E) Italy 
A) the U.S. 
B) France 
C) Germany 
D) Japan 
E) Italy

Question 10

Construction workers at times face high rates of unemployment because their work is both seasonal and subject to wide swings over the business cycle.

Accepted Answer

A) True 
 B)False

Question 11

Ginger quits her job as a secretary because she cannot handle the stress. It takes her three weeks of solid effort to land a job as a receptionist. Over these three weeks, she would be considered frictionally unemployed.

Accepted Answer

A) True 
 B)False

Question 12

Full employment is when the unemployment rate is zero.

Accepted Answer

A) True 
 B)False

Question 13

If Dave loans funds at 2 percent while the inflation rate is 4 percent, his real rate of interest is -2 percent.

Accepted Answer

A) True 
 B)False

Question 14

During periods of high inflation, people want to hold as much money as possible.

Accepted Answer

A) True 
 B)False

Question 15

Deflation refers to

Accepted Answer

A) decreasing relative prices 
B) a decreasing price level 
C) a slowing down of the rate of inflation 
D) a slowing down of the rate of relative price decreases 
E) a federal government policy of running budget surpluses 
A) decreasing relative prices 
B) a decreasing price level 
C) a slowing down of the rate of inflation 
D) a slowing down of the rate of relative price decreases 
E) a federal government policy of running budget surpluses

Question 16

The type of unemployment most likely to be experienced by a touring professional golfer is

Accepted Answer

A) frictional unemployment 
B) structural unemployment 
C) seasonal unemployment 
D) cyclical unemployment 
E) discouraged-worker unemployment 
A) frictional unemployment 
B) structural unemployment 
C) seasonal unemployment 
D) cyclical unemployment 
E) discouraged-worker unemployment

Question 17

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 unemployment rate?

Accepted Answer

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

Question 18

If people suddenly become more willing to lend money, what happens to the equilibrium rate of interest?

Accepted Answer

A) An increase in demand for loanable funds will increase the interest rate. 
B) An increase in the supply of loanable funds will increase the interest rate. 
C) An increase in the supply of loanable funds will decrease the interest rate. 
D) An increase in demand for loanable funds will decrease the interest rate. 
E) A simultaneous increase in both the supply of and demand for loanable funds makes it impossible to predict what will happen to the rate of interest. 
A) An increase in demand for loanable funds will increase the interest rate. 
B) An increase in the supply of loanable funds will increase the interest rate. 
C) An increase in the supply of loanable funds will decrease the interest rate. 
D) An increase in demand for loanable funds will decrease the interest rate. 
E) A simultaneous increase in both the supply of and demand for loanable funds makes it impossible to predict what will happen to the rate of interest.

Question 19

Full employment

Accepted Answer

A) exists when everyone in the economy has a job 
B) exists when everyone who wants a job has one 
C) exists when the unemployment rate is zero 
D) exists when everyone in the labor force has a job 
E) will always include some unemployment 
A) exists when everyone in the economy has a job 
B) exists when everyone who wants a job has one 
C) exists when the unemployment rate is zero 
D) exists when everyone in the labor force has a job 
E) will always include some unemployment

Question 20

The supply of loanable funds curve slopes downward to the right.

Accepted Answer

A) True 
 B)False

Exam 8: Unemployment and Inflation

Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

Some economists have argued that inflation during the 1970s contributed to the U.S. economy's relatively slow growth rate. What is the basis for this view?

Suppose the price levels in four successive years are 100, 120, 133, and 140. Which of the following is true?

If two parties to a loan contract agree that the lender should earn an 8 percent increase in purchasing power as a result of a loan, and the inflation rate is 5 percent, what is the nominal interest rate?

The "long-term unemployed" are those who are unemployed for:

Hyperinflation refers to a situation in which

Which of the following statements about unemployment is true?

The official unemployment rate disguises the extent of the unemployment problem because

Since 1980, a country that has experienced deflation is

Construction workers at times face high rates of unemployment because their work is both seasonal and subject to wide swings over the business cycle.

Ginger quits her job as a secretary because she cannot handle the stress. It takes her three weeks of solid effort to land a job as a receptionist. Over these three weeks, she would be considered frictionally unemployed.

Full employment is when the unemployment rate is zero.

If Dave loans funds at 2 percent while the inflation rate is 4 percent, his real rate of interest is -2 percent.

During periods of high inflation, people want to hold as much money as possible.

Deflation refers to

The type of unemployment most likely to be experienced by a touring professional golfer is

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 unemployment rate?

If people suddenly become more willing to lend money, what happens to the equilibrium rate of interest?

Full employment

The supply of loanable funds curve slopes downward to the right.

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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