Deck 4: Goals and Problems of the Macroeconomy: Employment, Prices and Production

Question 1

Each of the following is a major macroeconomic goal in the United States EXCEPT:

A) price stability.
B) full employment.
C) an equal distribution of income.
D) full production and economic growth.

Answer 1

an equal distribution of income.

Question 2

Macroeconomics examines:

A) employment, output, and inflation.
B) pricing, profit maximization, and utility maximization.
C) the behavior of individual households, businesses, and government units.
D) all of the above.

Answer 2

employment, output, and inflation.

Question 3

We study macroeconomics to understand:

A) the types of problems that can arise in an economy at large.
B) the means to solve the problems that can arise in an economy at large.
C) how an economy operates and how its various sectors interrelate.
D) all of the above.

Answer 3

all of the above.

Question 4

The three major macroeconomic problems are:

A) debt, deficits, and taxation.
B) unemployment, inflation, and taxation.
C) unemployment, falling production, and deficits.
D) unemployment, falling production, and inflation.

Question 5

The Employment Act of 1946:

A) provides tax breaks for private firms that hire the unemployed.
B) ensures that the U.S. economy will function at maximum employment at all times.
C) authorizes the government to provide jobs for those who cannot find employment in the private sector.
D) authorizes the government to assist in creating an environment to promote maximum employment.

Question 6

In the Employment Act of 1946, the federal government committed itself to:

A) creating state employment services to collect statistics on the unemployed.
B) insuring that the economy will always operate with stable prices and at full employment.
C) helping create conditions that will lead to stable prices, full employment, and full production.
D) hiring large numbers of workers for government projects whenever the unemployment rate gets too high.

Question 7

The economic term for a resource that is available for production but is not being utilized is:

A) idle.
B) wasted.
C) inefficient.
D) unemployed.

Question 8

When economists refer to unemployed resources they mean unutilized:

A) land.
B) labor.
C) capital.
D) all of the above.

Question 9

Which of the following is NOT a direct consequence of unemployment?

A) higher inflation rates.
B) individual hardship for the unemployed.
C) lost output and production for society.
D) all of the above are consequences of unemployment.

Question 10

Unemployment results in an economic loss for society because it causes:

A) people to work harder than they would like.
B) prices on available goods and services to increase.
C) more resources than necessary to be hired when the unemployment ends.
D) the actual output of goods and services to be less than the possible, or potential, output.

Question 11

Which of the following statements about the effect of unemployment on output in the U.S. economy is true?

A) The output lost due to unemployment changes each year.
B) The annual amount of output the economy lost due to unemployment was much higher in the late 1990s and early 2000s than in the 1930s.
C) The output of the economy would have more than doubled in the late 1990s and early 2000s if the unemployment problem had been solved.
D) all of the above.

Question 12

Unemployment is a matter of concern to individual workers for each of the following reasons EXCEPT:

A) it often causes their taxes to go up.
B) it intensifies their personal struggle with scarcity.
C) if prolonged, it can affect spending habits and lifestyles.
D) it can affect self-esteem and have other psychological and physiological costs.

Question 13

Being unemployed can:

A) cause a person to alter spending patterns and lifestyle.
B) affect a person's self-esteem and relationships with others.
C) cause a person to experience depression and other psychological or physiological problems.
D) all of the above.

Question 14

Which of the following statements is true?

A) No reasonable person would willingly become unemployed.
B) Because of unemployment, some wants and needs that might have been satisfied go unsatisfied.
C) The only real concern about unemployment is that the unemployed do not have enough savings and may need to borrow.
D) All of the above are true.

Question 15

According to Application 4.1, "What's at Stake When a Job is Lost?":

A) the loss of a job typically has no effect on a household's sense of economic security.
B) the effect of the loss of a job is typically overstated because most people do not particularly like their work.
C) the loss of a job can lead to noneconomic problems, such as depression and divorce, as well as to economic problems.
D) because of government unemployment payments, the damage to economic security caused by the loss of a job is relatively small.

Question 16

Unemployment that is voluntary and of short duration to allow time to find new work is:

A) cyclical.
B) seasonal.
C) frictional.
D) structural.

Question 17

A person who quits a job in Los Angeles to look for work in Chicago is:

A) not unemployed.
B) cyclically unemployed.
C) frictionally unemployed.
D) structurally unemployed.

Question 18

Unemployment that occurs when people voluntarily quit their jobs to look for other work, or enter the workforce and are looking for a job, is called:

A) cyclical unemployment.
B) frictional unemployment.
C) structural unemployment.
D) systematic unemployment.

Question 19

Full employment means everyone in the labor force:

A) is working.
B) except the cyclically unemployed is working.
C) except the frictionally unemployed is working.
D) except the structurally unemployed is working.

Question 20

Full employment occurs when the unemployment rate falls to:

A) zero.
B) a level that includes only the frictionally unemployed.
C) a level that includes only the structurally unemployed.
D) a level that includes only the frictionally and cyclically unemployed.

Question 21

A college student looking for work immediately after graduation would be:

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

Question 22

Which of the following types of unemployment is voluntary, where the person chooses to leave their job?

A) Cyclical unemployment.
B) Frictional unemployment.
C) Structural unemployment.
D) None of the above.

Question 23

Involuntary unemployment that occurs due to workforce reductions during a downswing in economic activity is called:

A) cyclical unemployment.
B) frictional unemployment.
C) structural unemployment.
D) systematic unemployment.

Question 24

Involuntary unemployment caused by a decrease in the overall level of economic activity is:

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

Question 25

An auto worker laid off from a job because the economy is in a slump and car sales are down is classified as:

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

Question 26

Cyclical unemployment is more likely to:

A) be voluntary than involuntary.
B) affect young workers and workers with low seniority.
C) affect workers in the health care industry than workers in the automobile industry.
D) all of the above.

Question 27

Cyclical unemployment refers to:

A) unemployment that occurs at the same time every year.
B) people "cycling" through jobs, or holding them for a short period of time.
C) unemployment caused by a downswing in the overall level of economic activity.
D) the pattern of people leaving several jobs before they find the one that best suits their interests.

Question 28

Unemployment caused by an ongoing lack of consumer demand for a particular product, technological change that reduces the need for a specific type of labor, or the relocation of a production process is called:

A) cyclical unemployment.
B) frictional unemployment.
C) structural unemployment.
D) systematic unemployment.

Question 29

Unemployment that is due to a decrease in the demand for workers with a certain skill because of technological change is:

A) cyclical.
B) seasonal.
C) frictional.
D) structural.

Question 30

A structurally unemployed person would be one who is out of work because:

A) she just graduated and is looking for work.
B) she quit her summer job to return to school.
C) a computerized system now performs her job.
D) weak overall economic conditions caused a decrease in her employer's sales.

Question 31

Musicians who are out of work because electronic equipment can produce the same sounds that live musicians produce are:

A) cyclically unemployed.
B) frictionally unemployed.
C) structurally unemployed.
D) none of the above.

Question 32

Structural unemployment could be caused by:

A) changes in the types of goods and services buyers demand.
B) the elimination of positions by firms downsizing to become more efficient.
C) the closing of domestic manufacturing plants because production has been moved out of the country.
D) all of the above.

Question 33

Cyclical and structural unemployment differ in that:

A) cyclical unemployment is involuntary, while structural unemployment is voluntary.
B) full employment occurs when everyone in the labor force other than the structurally unemployed is working.
C) cyclically unemployed persons have the possibility of regaining their jobs, while structurally unemployed persons have no possibility of regaining their jobs.
D) all of the above.

Question 34

Jeff lost his job at an automobile assembly plant because of declining new car sales caused by a weak economy. Casey quit her job at the auto assembly plant to devote all her time to finding a higher paying job. Jeff is:

A) cyclically unemployed and Casey is frictionally unemployed.
B) frictionally unemployed and Casey is cyclically unemployed.
C) structurally unemployed and Casey is cyclically unemployed.
D) structurally unemployed and Casey is frictionally unemployed.

Question 35

Lee lost his job because his employer downsized its operations. Ramon resigned from his job to find work closer to his family. Lee's unemployment is:

A) cyclical and Ramon's is frictional.
B) structural and Ramon's is cyclical.
C) structural and Ramon's is frictional.
D) frictional and Ramon's is structural.

Question 36

The labor force includes all persons:

A) who are working, regardless of their age.
B) capable of working, regardless of their age.
C) 16 years of age and older who are working.
D) 16 years of age and older who are working or actively seeking work.

Question 37

The labor force consists of all persons:

A) 16 years of age and older.
B) 18 years of age and older (or 21 and older if attending college).
C) 16 years of age and older who are working or actively seeking work.
D) 18 years of age and older (or 21 and older if attending college) who are working or actively seeking work.

Question 38

Brian quit his job at a local restaurant to return to school full-time. Rachel was laid off after her employer purchased a computer that eliminated her job.

A) Both Brian and Rachel are frictionally unemployed.
B) Both Brian and Rachel are no longer in the labor force.
C) Brian is frictionally unemployed and Rachel is structurally unemployed.
D) Brian is no longer in the labor force and Rachel is structurally unemployed.

Question 39

Assume a part-time student was laid off from work last June because the economy was in a slump. The student spent the month of July looking for a job, and decided in August to not look for work and become a full-time student. During July and August, this student was:

A) cyclically unemployed.
B) cyclically unemployed and then out of the labor force.
C) frictionally unemployed and then out of the labor force.
D) cyclically unemployed and then frictionally unemployed.

Question 40

Who of the following would NOT be counted as unemployed?

A) A retired dentist looking for work to supplement her Social Security payments.
B) A sales clerk who was fired for poor performance, but has some interviews scheduled.
C) A student who has been laid off and decides to devote all energies to attending school.
D) None of these people would be counted as unemployed.

Question 41

A participation rate refers to:

A) the percentage of people in some specified group that are employed.
B) the total number of people in some specified group that are employed.
C) the percentage of people in some specified group that are in the labor force.
D) the total number of people in some specified group that are in the labor force.

Question 42

The participation rate for full-time college students measures the percentage of these students who are:

A) working.
B) in the labor force.
C) seeking, but currently do not have, a job.
D) receiving credit for internship and work-study programs.

Question 43

The participation rate for women measures the percent of all women:

A) who are full-time homemakers.
B) who are employed, regardless of age.
C) 16 years of age and older who are employed.
D) 16 years of age and older who are employed or actively seeking work.

Question 44

In general over the past several decades, the participation rates for men and women in the labor force have:

A) both increased.
B) both decreased.
C) increased and decreased, respectively.
D) decreased and increased, respectively.

Question 45

From 1970 through 2008 the overall U.S. participation rate increased from 60.4% to 65.8%. The primary factor behind this increase was the increasing participation rates of:

A) males.
B) females.
C) males over 50 years of age.
D) teenagers between 16 and 19 years of age.

Question 46

The participation rate is highest among:

A) males.
B) females.
C) teenagers.
D) persons 16 through 25 years of age.

Question 47

The unemployment rate is highest among:

A) males.
B) females.
C) teenagers.
D) women who maintain families.

Question 48

The unemployment rate for men with four or more years of college is lower than the unemployment rate for:

A) all men.
B) all workers.
C) men who dropped out of high school.
D) all of the above.

Question 49

Since the 1990s the unemployment rate for:

A) all women tended to be about the same as the unemployment rate for all men.
B) women who maintain families tended to be higher than the unemployment rate for teenagers.
C) all men with less than four years of high school tended to be higher than the unemployment rate for teenagers.
D) all of the above.

Question 50

An unemployment rate of six percent means that six percent of the:

A) labor force is voluntarily unemployed.
B) labor force is involuntarily unemployed.
C) labor force is out of work and actively seeking employment.
D) population is out of work and actively seeking employment.

Question 51

Use the basis of the following table, which lists population statistics for a hypothetical country.


-The participation rate for the eligible civilian population is:

A) 40.0 percent.
B) 66.7 percent.
C) 80.0 percent.
D) 83.3 percent.

Question 52

Use the basis of the following table, which lists population statistics for a hypothetical country.


-The unemployment rate is:

A) 16.0 percent.
B) 20.0 percent.
C) 25.0 percent.
D) none of the above.

Question 53

Use the basis of the following table, which lists population statistics for a hypothetical country.


-Compared to recent unemployment rates in the United States, this country has a:

A) low rate of unemployment.
B) high rate of unemployment.
C) normal rate of unemployment.
D) negative rate of unemployment.

Question 54

The unemployment rate is calculated by:

A) surveying economists.
B) surveying business leaders.
C) random surveying of households by the U.S. Bureau of Labor Statistics.
D) adding up unemployment data from state employment offices.

Question 55

In officially compiled unemployment statistics, a person would be classified as unemployed if, during the week the statistics were collected, he or she:

A) worked without pay for 25 hours on the family farm.
B) was away from the job due to a labor-management dispute.
C) worked 4 hours on a part-time basis but wanted to work 40 hours.
D) none of the above.

Question 56

Based on the U.S. Bureau of Labor Statistics' method for measuring employment and unemployment, who of the following would be "employed?"

A) A person who works two hours a week for pay.
B) A person who works forty hours a week for pay in a large corporation.
C) A person who works twenty hours a week for no pay in a family-owned business.
D) All of the above.

Question 57

A person who has dropped out of the labor force after a long and unsuccessful search for a job is:

A) a discouraged worker.
B) frictionally unemployed.
C) structurally unemployed.
D) still included in the unemployment statistics.

Question 58

Which of the following statements is true?

A) Discouraged workers are workers who do not like their jobs but stay with them rather than seek new jobs.
B) The number of discouraged workers in the economy decreases as the economy approaches full employment.
C) Discouraged workers cause the reported level of unemployment in the economy to overstate the true level of unemployment.
D) All of the above.

Question 59

Discouraged workers:

A) are not counted as part of the labor force.
B) have not been a problem since the Employment Act of 1946.
C) are afraid to leave their jobs for fear of not finding other work.
D) are subtracted from the total labor force to arrive at full employment.

Question 60

The overall unemployment rate:

A) is the same as the rate for each state.
B) overstates unemployment by including discouraged workers who would like to leave their jobs.
C) is a good measure of unemployment because different regions experience similar unemployment conditions.
D) is a national figure that does not disclose different unemployment conditions experienced in different regions of the country.

Question 61

A low unemployment rate provides no information about:

A) the types of jobs held by the employed.
B) whether the employed hold full-time or part-time jobs.
C) how many skilled people accepted unskilled jobs rather than be unemployed.
D) all of the above.

Question 62

The "official"unemployment rate may understate the extent to which labor resources are underutilized because:

A) the official rate does not include discouraged workers.
B) the official rate is a national figure that does not reflect regional employment differences.
C) official statistics categorize a person as employed if he or she did any work at all for pay during the survey week.
D) all of the above

Question 63

Persons who take jobs that do not fully utilize their abilities are:

A) underemployed.
B) discouraged workers.
C) not included in the labor force.
D) all of the above.

Question 64

People are considered to be "underemployed"if they work:

A) in a job that fully utilizes their skills.
B) in a job that does not fully utilize their skills.
C) one job and would like to work two jobs.
D) two jobs to make enough income but would prefer just to work one job.

Question 65

Full employment:

A) means that 100 percent of the labor force is working.
B) means that only the frictionally unemployed are out of work.
C) occurs when approximately 90 percent of the labor force is working.
D) occurs at a rate of unemployment which is universally agreed on and has not changed over the years.

Question 66

The rate of unemployment that represents full employment would likely increase if there were an increase in the:

A) number of teenagers in the labor force.
B) number of married men in the labor force.
C) requirements for qualifying for unemployment compensation.
D) all of the above.

Question 67

Which of the following would be expected to increase the rate of unemployment associated with full employment?

A) People live longer.
B) Unemployment benefits increase.
C) More people attend school full time.
D) An increase in the general level of wages.

Question 68

Which of the following is false?

A) The rate considered to be the full employment rate of unemployment has changed over the years.
B) Changes in the composition of the labor force and the growth in temporary, part-time work have caused a re-evaluation of the unemployment rate associated with full employment.
C) The full employment rate of unemployment has been 4% since the Depression of the 1930s; prior to that it was 5%.
D) The goal of full employment means that only those voluntarily out of work are unemployed.

Question 69

The unemployment rate that results when cyclical unemployment is eliminated is the:

A) natural rate.
B) frictional rate.
C) voluntary rate.
D) full employment rate.

Question 70

The natural rate of unemployment is the rate that results when:

A) cyclical unemployment is eliminated.
B) frictional unemployment is eliminated.
C) structural unemployment is eliminated.
D) involuntary unemployment is eliminated.

Question 71

The natural rate of unemployment includes the:

A) frictionally and cyclically unemployed.
B) cyclically and structurally unemployed.
C) frictionally and structurally unemployed.
D) frictionally, cyclically, and structurally unemployed.

Question 72

An economy experiences inflation when:

A) prices are high.
B) prices are increasing.
C) the purchasing power of money is high.
D) the purchasing power of money is increasing.

Question 73

A country where there are extremely rapid increases in the general level of prices is experiencing:

A) stagflation.
B) hyperinflation.
C) political inflation.
D) structural inflation.

Question 74

When prices increase, real income:

A) increases.
B) decreases.
C) is unaffected.
D) becomes a poor measure of purchasing power.

Question 75

Income stated in terms of current dollars is:

A) real income.
B) effective income.
C) money, or nominal, income.
D) a good measure of purchasing power in a period of severe inflation.

Question 76

Income measured in terms of the amount of goods and services it can purchase is:

A) real income.
B) money income.
C) current income.
D) nominal income.

Question 77

A person whose paycheck grows at a slower rate than inflation would experience:

A) a decrease in money income and real income.
B) an increase in money income and real income.
C) a decrease in money income and an increase in real income.
D) an increase in money income and a decrease in real income.

Question 78

Which of the following statements is true?

A) Inflation hurts all groups in society equally.
B) The money incomes of fixed income earners do not keep pace with inflation.
C) People working under long-term contracts benefit when the inflation rate exceeds their contracted wage increases.
D) All of the above.

Question 79

Which of the following statements is true?

A) Banks holding long-term, fixed-rate mortgages carrying low interest rates are penalized by high rates of inflation.
B) People saving for the future benefit when the inflation rate is greater than the interest rate they receive on their savings.
C) Borrowers paying back past loans are penalized if the inflation rate is greater than the interest rate they are paying on their loans.
D) All of the above.

Question 80

The real rate of interest is:

A) the nominal rate of interest plus the inflation rate.
B) the nominal rate of interest minus the inflation rate.
C) the inflation rate divided by the nominal rate of interest.
D) this year's nominal rate of interest minus last year's nominal rate of interest.