Deck 11: Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Question 1

Unemployment rises and falls in the same direction as output over the business cycle.

Answer 1

False

Question 2

New inventions may displace some workers, resulting in structural unemployment.

Answer 2

True

Question 3

Cyclical unemployment rises and falls with fluctuations in the macro economy.

Answer 3

True

Question 4

The GDP deflator measures the prices of only those goods and services that are bought by consumers.

Question 5

The NBER determined that the U.S. economy experienced a recession that officially began in December 2007 and ended in June 2009.

Question 6

The unemployment rate measures the number of unemployed people expressed as a percentage of the total population.

Question 7

Both minimum wages and unions' ability to get higher wages for their members increase the rate of unemployment.

Question 8

People who settle for part-time jobs are officially considered to be unemployed.

Question 9

Unemployment insurance can lower the cost of job searches to individuals and result in higher rates of unemployment.

Question 10

Nearly every society desires to achieve the macroeconomic goals of high employment, a stable price level, and high economic growth.

Question 11

The inflation rate rose from 3 percent to 20 percent during the Great Depression.

Question 12

The natural rate of unemployment can change over time as technological, demographic, institutional, and other conditions vary.

Question 13

The economy reaches full employment when the unemployment rate equals zero.

Question 14

Another name for the contractionary phase of a business cycle is recession.

Question 15

Economists believe that the Consumer Price Index tends to understate the actual rate of inflation.

Question 16

The cost of unemployment to society includes the loss of the goods and services that might have been produced if the unemployed had been employed.

Question 17

Each person in the population can be classified as employed or unemployed.

Question 18

Unemployment insurance leads to a better match of jobs with job seekers.

Question 19

Seasonal unemployment is the temporary unemployment that results from the search time that people require when searching for suitable jobs and that firms require when looking for suitable workers.

Question 20

Unanticipated inflation will benefit creditors at the expense of debtors.

Question 21

The total labor force equals:

A)the number of people who are officially employed.
B)the number of people above the age of thirty five who are voluntarily unemployed.
C)the number of people aged sixteen and older who are available for employment.
D)the number of people aged sixteen and over in the population.
E)the number of people aged thirty and above who are looking for employment.

Question 22

The unemployment rate measures:​

A)the number of unemployed workers as a percentage of the entire population.
B)the number of unemployed workers as a percentage of the population over the age of sixteen.
C)the number of unemployed workers as a percentage of the labor force.
D)the number of people unemployed divided by the number of people employed.
E)the number of people unemployed divided by the number of people over the age of thirty five.

Question 23

The figure below shows the total adult population in an economy and the number of civilians who are employed and unemployed. Based on the figure, the number of people considered to be out of the labor force is _____.Figure 11-1

A)100 million
B)60 million
C)85 million​
D)180 million
E)15 million

Question 24

High rates of unemployment are undesirable because:

A)they encourage high levels of per capita savings.
B)they result in the loss of potential output of goods and services.
C)they lead to high rates of inflation
D)they lead to high levels of individual consumption.
E)they lead to excessive increases in informal activities.

Question 25

If the number of officially employed and officially unemployed people do not change but the size of the population increases by 10%, there will be _____.

A)an increase in the unemployment rate and an increase in the labor force participation rate
B)an increase in the unemployment rate and no change in the labor force participation rate
C)a decrease in the unemployment rate and a decrease in the labor force participation rate
D)a decrease in the labor force participation rate with an increase in the unemployment rate
E)a decrease in the labor force participation rate but no change in the unemployment rate

Question 26

The figure below shows the total adult population and the number of employed and unemployed civilians in an economy. Based on the figure, the labor force participation rate is approximately _____ percent.Figure 11-1

A)69.6
B)64.3
C)92.3
D)5.4
E)58.9

Question 27

The most significant real economic cost of high unemployment is:

A)the money cost of unemployment insurance payments to the unemployed.
B)the lost tax revenue that might have been paid by persons if they had worked.
C)the difference in income between a person's lost job and her new job.
D)the potential goods and services that might have been produced but were not.
E)the number of people working in the underground economy.

Question 28

If the number of employed people equals 185 million, the number of unemployed people equals 15 million, and the number of people in the population aged 16 and older equals 210 million, then:

A)the unemployment rate equals 7.14% and the labor force participation rate equals 95.2%.
B)the unemployment rate equals 7.23% and the labor force participation rate equals 85.7%.
C)the unemployment rate equals 7.5% and the labor force participation rate equals 92.9%.
D)the unemployment rate equals 7.7% and the labor force participation rate equals 92.9%.
E)the unemployment rate equals 7.7% and the labor force participation rate equals 92.9%

Question 29

The figure below shows the total adult population in an economy and the number of civilians who are employed and unemployed. Based on the figure, _____ people constitute the labor force.Figure 11-1

A)100 million
B)195 million
C)85 million
D)180 million
E)165 million

Question 30

In November 1995, the labor force in Aberdeen, South Dakota, was 14,800. There were 14,483 persons employed. The local unemployment rate was:

A)1.2 percent.
B)2.1 percent.
C)5.6 percent.
D)7.1 percent.
E)3.5 percent.

Question 31

If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons in the population aged 16 and older equals 40 million, the unemployment rate equals:

A)8 percent.
B)20 percent.
C)25 percent.
D)32 percent.
E)60 percent.

Question 32

A major macroeconomic goal of nearly every society is:

A)maintaining prices at high levels.
B)maintaining prices at very low levels.
C)maintaining a high rate of economic growth.
D)maintaining a high rate of population growth.
E)maintaining immigration rates at high levels.

Question 33

A discouraged worker is:

A)one who opts to quit work to pursue higher education.
B)one who opts to quit searching for work after unsuccessfully seeking employment.
C)one who is a part-time worker wanting to work more hours.
D)one who worked before and is reentering the labor force.
E)one who is temporarily unemployed because he or she is looking for a suitable job.

Question 34

An unemployment rate of 8 percent implies that:​

A)8 percent of the total population is unemployed.
B)8 percent of the population over the age of 16 is unemployed.
C)8 percent of the civilian labor force is unemployed.
D)the number of unemployed people equals 8 percent of the employed people.
E)the number of unemployed people is 8 percent of the population aged thirty and above.

Question 35

The unemployment rate may underestimate the true extent of unemployment because:

A)it counts part-time workers as fully employed.
B)it does not account for employees who increase the number of hours they work.
C)it includes those who work in the underground economy.
D)it includes discouraged workers.
E)it does not include teenagers who join the labor force just after graduation.

Question 36

The unemployment rate is calculated as the number of people officially unemployed divided by:

A)the number of people employed, multiplied by 100.
B)the total population, multiplied by 100.
C)the total population over the age of thirty five, multiplied by 100.
D)the total civilian labor force, multiplied by 100.
E)the total population over the age of twenty one, multiplied by 100.

Question 37

The figure below shows the total adult population and the number of employed and unemployed civilians in the economy. Based on the figure, the unemployment rate is approximately _____.Figure 11-1

A)4.5​
B)7.7
C)9.2
D)5.4
E)8.3

Question 38

Economic growth is measured by changes in _____.

A)real GDP per capita
B)nominal GDP
C)the supply of money
D)the unemployment rate
E)the inflation rate

Question 39

Which of the following individuals are considered officially unemployed?

A)An individual who has quit searching for work after unsuccessfully seeking employment
B)An individual who quits his job to raise a child
C)An individual who is not looking for a job because he works in the underground economy
D)An individual who has grudgingly settled for a part-time job
E)An individual who has been temporarily laid off from his or her job

Question 40

The unemployment rate in a town in which 65,400 persons are employed and 11,000 persons are unemployed equals:

A)11 percent.
B)14.4 percent.
C)16.8 percent.
D)18.2 percent.
E)15.4 percent.

Question 41

The worst case of unemployment in the United States took place during _____.

A)World War I
B)World War II
C)the 1973 oil crisis
D)the Great Depression
E)the financial crisis of 2008

Question 42

A federal program aimed at retraining the unemployed workers of the declining auto and steel industries is designed to reduce _____.

A)seasonal unemployment
B)cyclical unemployment
C)structural unemployment
D)frictional unemployment
E)underemployment

Question 43

Structural unemployment includes:​

A)unemployment caused by workers who leave their jobs to seek better jobs.
B)unemployment caused by automation that displaces workers from their jobs.
C)unemployment caused by a decline in the economy's total production.
D)unemployment caused by the geographical and occupational mobility of the labor force.
E)unemployment caused by the seasonal nature of some jobs.

Question 44

A city in which 320,000 persons are employed has a labor force of 359,500 persons. The unemployment rate for the city is:

A)7.8 percent.
B)11.0 percent.
C)12.3 percent.
D)14.5 percent.
E)15 percent.

Question 45

Cyclical unemployment arises when:

A)business activities in an economy decline.
B)a worker leaves a job to seek a better position.
C)labor unions in an industry strike for higher wages.
D)the agriculture sector completes a cycle of planting, cultivating, and harvesting a nation's food supply.
E)new inventions in technology increase automation in an industry resulting in existing workers being replaced.

Question 46

Suzie works in her home as a full-time caretaker and homemaker. She is _____.

A)officially employed
B)officially unemployed
C)out of the labor force
D)a discouraged worker
E)underemployed

Question 47

A small town named Erbia has a labor force of 78,567 persons of whom 74,382 are employed. Erbia's unemployment rate is:

A)5.3 percent.
B)5.6 percent.
C)6.0 percent.
D)7.8 percent.
E)8.9 percent.

Question 48

A forestry worker who is out of work because of a temporary low demand for wood products during a recession is facing _____.

A)frictional unemployment
B)underemployment
C)cyclical unemployment
D)structural unemployment
E)seasonal unemployment

Question 49

An individual who voluntarily leaves one job and spends a period of time seeking another is considered _____.

A)underemployed
B)cyclically unemployed
C)structurally unemployed
D)seasonally unemployed
E)frictionally unemployed

Question 50

People who do not hold a job but are actively seeking work are considered to be:

A)out of the labor force.
B)officially unemployed.
C)underemployed.
D)officially poor.
E)employed in the underground economy.

Question 51

Which of the following individuals would be considered unemployed?

A)A lawyer temporarily working as an assistant in a law firm
B)A computer technician who has not worked for 10 months and gave up looking for a job 4 months ago
C)A full-time student who feels that he is taking too many classes to have the time to work
D)A person with a college degree driving a taxi for a living
E)A fresh college graduate who is actively looking for a job

Question 52

Which of the following statements is incorrect?

A)Job losers are not the only category of people that are unemployed.
B)Unemployment rates in the United States during the Great Depression exceeded 50 percent.
C)The labor force participation rate is the percentage of the non-institutional population over age 16 that is in the labor force.
D)The increase in the labor force participation rate since 1950 can be partly attributed to the entry of baby boomers into the labor force.
E)Unemployment tends to be greater among the very young, among blacks and other minorities, and among workers with few skills.

Question 53

A welder who quits his job and moves from Houston to Buffalo, where welding jobs are available, would be facing _____.

A)frictional unemployment
B)underemployment
C)cyclical unemployment
D)structural unemployment
E)seasonal unemployment

Question 54

Underemployment occurs when:

A)a firm hires fewer than the required number of workers to save costs.
B)a firm hires workers who do not possess the required skills that the job demands.
C)a worker is over qualified and possesses more skills than what his job demands.
D)a firm hires more than the required number of workers.
E)a worker is laid off from his or her job temporarily and has the chance of being hired again.

Question 55

If the population aged 16 years and older equals 150 million, the labor force equals 110 million, and the total number of persons employed equals 98 million, then the unemployment rate is:

A)8 percent.
B)38 percent.
C)10.9 percent.
D)28 percent.
E)12.2 percent.

Question 56

A college student who is enrolled in school full-time and not seeking employment is considered:

A)out of the labor force.
B)a job leaver.
C)employed in the underground economy.
D)underemployed.
E)a reentrant

Question 57

Bill looked for work for six months but could not find a job he wanted. It has now been almost five months since he stopped looking for a job. In the context of employment, he is considered to be:

A)out of the labor force.
B)a new entrant.
C)employed in the underground economy.
D)underemployed.
E)a job leaver.

Question 58

The category of unemployment that is a byproduct of geographic and occupational mobility and generally considered to be a temporary problem is:

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

Question 59

Unemployment resulting from normal turnover in the labor market is called:

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

Question 60

Which of the following groups of people would be included when calculating the official unemployment rate?

A)Part-time workers
B)Workers temporarily laid off from jobs
C)Workers who have stopped looking for jobs after being unsuccessful
D)Full-time college students
E)Workers who possess more skills than what their jobs demand

Question 61

Which of the following is true?

A)The CPI and the GDP deflator tend to move in opposite directions.
B)The GDP deflator tends to be much more volatile than the CPI.
C)Both the CPI and the GDP deflator probably overstate the inflation rate.
D)The GDP deflator includes fewer goods than the CPI.
E)The GDP deflator generally rises substantially faster than the CPI during inflationary conditions.

Question 62

Which of the following people is most likely to be structurally unemployed?

A)Brendan left his job as a short-order cook in New Jersey to join as a short-order cook in Madrid, New Mexico. He was unemployed for six weeks during the transition.
B)Mildred quit her job after giving birth to a child.
C)Clem, a skilled corset maker, lost his job when his factory shut down due to a permanent reduction in the demand for corsets.
D)Danielle lost her job when the electronics assembly plant was shut down temporarily due to low product sales in a slumping economy.
E)Leonard, a ski resort manager, was unemployed during summer due to a lack of tourists.

Question 63

If firms pay employees an efficiency wage, _____.

A)absenteeism would be expected to decrease
B)turnover would be expected to increase
C)training costs would likely increase
D)more shirking on the job would likely occur
E)there would likely be a shortage of employees

Question 64

The continuing rise in the overall price level is called _____.

A)inflation
B)deflation
C)recession
D)boom
E)depression

Question 65

​Which of the following measures the average level of prices of all final goods and services produced in the economy?

A)The GDP deflator
B)Nominal GDP
C)Real GDP
D)The Consumer Price Index (CPI)
E)Purchasing power parity

Question 66

The current cost of a market basket of goods is $9,000. The cost of the same basket of goods in the base year was $3,000. The current price index is:

A) 900.
B)300.
C)166.
D)133.
E)400.

Question 67

If postal workers lose their positions because of widespread e-mailing, texting, and faxing, and they cannot find alternative jobs using their existing skills, these individuals would most likely be considered:

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

Question 68

When unemployment rises above the natural rate, it reflects the existence of _____.

A)frictional unemployment
B)structural unemployment
C)seasonal unemployment
D)cyclical unemployment
E)underemployment

Question 69

If a minimum wage law is passed imposing a price floor above the equilibrium price of unskilled labor, _____.​

A)the quantity of unskilled labor demanded will exceed the quantity of unskilled labor supplied
B)the quantity of unskilled labor supplied will equal the quantity of unskilled labor demanded
C)the quantity of unskilled labor supplied will exceed the quantity of unskilled labor demanded
D)there will be excess supply of skilled labor
E)there will be excess demand for skilled labor

Question 70

If union officials are able to increase wages through collective bargaining, _____.

A)the quantity of union labor demanded will increase, as firms will want to hire more workers
B)the workers who already have jobs will benefit, but some equally skilled workers will be worse off
C)there will be a leftward shift of the labor supply curve and a rightward shift of the demand for labor curve
D)the quantity of union labor supplied will decrease because unionized workers will prefer leisure over more work
E)there will be a huge decline in wage rates in the long run

Question 71

Which of the following is not true?

A)At the natural rate of unemployment, the economy is considered to be at full employment.
B)At full employment, the economy produces its potential output.
C)If the unemployment rate in an economy is greater than its natural rate, the economy produces an output level that is less than its potential output.
D)If the unemployment rate in an economy is less than its natural rate, the economy experiences cyclical unemployment.
E)The natural rate of unemployment increases when there is an increase in frictional unemployment.

Question 72

Union officials negotiate their wages and benefits through a process called _____.

A)outsourcing
B)collective bargaining
C)undercutting
D)collusion
E)merging

Question 73

Which of the following exclusively measures the trend in the prices of certain goods and services purchased by a typical household?

A)The GDP deflator
B)Nominal GDP
C)Real GDP
D)The Consumer Price Index
E)Purchasing power parity

Question 74

Which of the following statements is correct?

A)Technological advances always lead to the permanent displacement of workers.
B)The typical unemployment compensation in the United States is one's half salary for 26 weeks.
C)Unemployment compensation increases the opportunity cost of being unemployed to a worker.
D)Unemployment compensation discourages longer job searches, which leads to a mismatch between jobs and employees.
E)If there is a balance between demand and supply in the labor market, frictional employment must equal zero.

Question 75

The term full employment implies an unemployment rate of:

A)zero.
B)approximately 5%.
C)approximately 10%.
D)100%.
E)approximately 50%.

Question 76

Which of the following causes a surplus in the labor market?

A)A minimum wage rate
B)Price discrimination
C)Outsourcing
D)The law of diminishing marginal productivity
E)The backward-bending shape of the labor supply curve

Question 77

When the market wage is higher than the equilibrium wage in an economy, _____.

A)there is excess demand for labor
B)there is unemployment
C)the economy produces at full employment level
D)the labor supply curve shifts to the left
E)the labor demand curve shifts to the right

Question 78

If the economy is operating at the natural rate of unemployment, _____.

A)frictional unemployment will be zero
B)structural unemployment will be zero
C)cyclical unemployment will be zero
D)the unemployment rate will equal zero
E)seasonal unemployment will be zero

Question 79

Which of the following is true of unemployment insurance?

A)A person should quit his or her job due to unsatisfactory working conditions to avail the insurance.
B)A person should lose his or her job on account of his or her skills being no longer required to avail the insurance.
C)A person should be working in the underground economy to avail the insurance.
D)The insurance offers incentives to look for jobs and accept the first job offer.
E)The insurance tends to reduce the average time of unemployment.

Question 80

The development of a nationwide computerized job bank listing all job openings would most likely reduce:

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