Deck 10: Consumer Choice Theory

Question 1

The average duration of unemployment tends to be longer, the higher the unemployment rate.

Answer 1

True

Question 2

If, over time, a greater proportion of the labor force is comprised of middle-aged individuals, one would expect the natural rate of unemployment to rise.

Answer 2

False

Question 3

New inventions may displace some workers, but generally lead to the growth of jobs in new industries.

Answer 3

True

Question 4

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

Question 5

Roughly 60 percent of women participate in the labor force today.

Question 6

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

Question 7

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

Question 8

Unexpected inflation harms both debtors and individuals who live on fixed incomes.

Question 9

Economists refer to the "typical" rate of unemployment as the natural rate of unemployment.

Question 10

Cyclical unemployment rises and falls with fluctuations in the macroeconomy.

Question 11

Economists consider cyclical unemployment to be the byproduct of a healthy economy.

Question 12

Some people working in the underground economy could be counted in labor statistics as unemployed, while others may be counted as not in the labor force.

Question 13

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

Question 14

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 15

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

Question 16

Luke has lent his friend Mitch some money. However he underestimated the rate of inflation when they agreed to a repayment and interest schedule. Mitch will benefit from the inflation.

Question 17

Many economists believe that skill-biased technical change has increased the incomes of highly skilled workers and decreased the incomes of low-skill workers.

Question 18

Each person in the population can be classified as employed, unemployed, or not in the labor force.

Question 19

The Employment Act of 1946 dictated the U.S. goal of maintaining high employment through high economic growth but did not specify any goals with regard to the price level.

Question 20

Many economists believe that skill-biased technical change has increased the incomes of both highly skilled workers and low-skill workers

Question 21

The CPI measures the average level of prices of all final goods and services produced in the economy.

Question 22

Which piece of legislation committed the government to pursuing unemployment policies that are consistent with maintaining price stability?

A)​The Effective Pricing Act of 1971
B)​The Employment Initiative Act of 1998
C)​The Employment Act of 1946
D)​The Stable Growth Act of 1960

Question 23

The construction of a price index is complicated by several factors, including changes in the quality of goods and services over time, the introduction of new products, and the disappearance of old, outmoded products.

Question 24

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

Question 25

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

Question 26

The unemployment rate is the number of people classified as unemployed as a percentage of:

A)​the entire population.
B)​the population over the age of sixteen.
C)​the labor force.
D)​the number of people over the age of sixteen who are employed.

Question 27

The unemployment rate is defined as:

A)​unemployed workers plus discouraged workers, divided by the total population over the age of sixteen.
B)​part-time workers plus full-time workers, divided by the total population over the age of sixteen.
C)​the percentage of the labor force that is unemployed.
D)​the percentage of the population over the age of sixteen that is unemployed.

Question 28

The unemployment rate measures:

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

Question 29

​Exhibit 10-1
Refer to Exhibit 10-1. According to the data provided, ____ people constitute the labor force.

A)​100 million.
B)​195 million.
C)​85 million.
D)​180 million.

Question 30

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

Question 31

If a worker was miscategorized as structurally unemployed when he was really frictionally unemployed, that would not change the natural rate of unemployment.

Question 32

A rapid, unexpected increase in the inflation rate could make real interest rates negative.

Question 33

The first formal acknowledgement of the primary macroeconomic goals of price stability, high employment, and promoting economic growth in the United States came with passage of the:

A)​Federal Reserve Act of 1913.
B)​the Sherman Antitrust Act of 1890.
C)​the Social Security Act of 1935.
D)​the Employment Act of 1946.

Question 34

A major macroeconomic goal of nearly every society is:

A)​maintaining stability of prices.
B)​maintaining high levels of employment.
C)​achieving high rates of economic growth.
D)​all of the above.

Question 35

​Exhibit 10-1
Refer to Exhibit 10-1. The number of people considered to be out of the labor force is:

A)​100 million.
B)​60 million.
C)​85 million.
D)​180 million.

Question 36

Unanticipated inflation will benefit creditors at the expense of debtors.

Question 37

High rates of unemployment are undesirable because:

A)​they cause increased levels of societal tension.
B)​society loses potential production of goods and services.
C)​families of the unemployed may find it difficult to survive.
D)​all of the above.

Question 38

Real gross domestic product is the total value of all:

A)​goods and services produced in a country adjusted for inflation.
B)​goods and services produced in a country without an adjustment for inflation.
C)​final goods and produced in a country services adjusted for inflation.
D)​final goods and services produced in a country without adjustment for inflation.

Question 39

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

Question 40

The real interest rate is calculated by subtracting inflation from the nominal interest rate.

Question 41

Exhibit 10-2
Assume the following information about a country for the following problems:
The total adult population equals 580 million;
The number of civilians employed is 360 million;
The number of civilians unemployed is 30 million
​
Refer to Exhibit 10-2. According to the data provided, ____ people constitute the labor force.

A)​200 million.
B)​390 million
C)​170 million.
D)​360 million.

Question 42

Exhibit 10-2
Assume the following information about a country for the following problems:
The total adult population equals 580 million;
The number of civilians employed is 360 million;
The number of civilians unemployed is 30 million
​
Refer to Exhibit 10-2. From the data provided, the unemployment rate is approximately ____ percent.

A)​4.5
B)​7.7
C)​9.2
D)​5.4

Question 43

If the unemployment rate is 8 percent, this means:

A)​8 percent of the population is unemployed.
B)​8 percent of the population over age 16 is unemployed.
C)​8 percent of the labor force is unemployed.
D)​the number of unemployed persons equals 8 percent of the employed persons.

Question 44

If the overall unemployment rate is 8 percent, it is likely that:

A)​It is greater than 8 percent for teenagers.
B)​It is less than 8 percent for college=educated middle-aged men.
C)​It is more than 8 percent for those without a high school diploma.
D)​All of the above are true.

Question 45

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 new job.
D)​the potential goods and services that might have been produced but weren't.

Question 46

If the numbers of people officially employed and officially unemployed each increased by 5%, with no change in the non-institutional civilian population, what would be the effect?

A)​an increase in the unemployment rate and no change in the labor force participation rate
B)​a decrease in the unemployment rate and no an increase in the labor force participation rate.
C)​no change in the unemployment rate and an increase in the labor force participation rate
D)​no change in the unemployment rate and a decrease in the labor force participation rate

Question 47

If the numbers of employed and unemployed do not change but the size of the civilian population increases by 10%, what would be the effect?

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)​an increase in the unemployment rate and a decrease in the labor force participation rate
D)​no change in the unemployment rate and a decrease in the labor force participation rate

Question 48

Exhibit 10-2
Assume the following information about a country for the following problems:
The total adult population equals 580 million;
The number of civilians employed is 360 million;
The number of civilians unemployed is 30 million
​
Refer to Exhibit 10-2. From the data provided, the labor force participation rate is approximately ____ percent.

A)​69.6
B)​64.3
C)​92.3
D)​5.4

Question 49

​Exhibit 10-1
Refer to Exhibit 10-1. From the data provided, the labor force participation rate is approximately ____ percent.

A)​69.6
B)​64.3
C)​92.3
D)​5.4

Question 50

Exhibit 10-2
Assume the following information about a country for the following problems:
The total adult population equals 580 million;
The number of civilians employed is 360 million;
The number of civilians unemployed is 30 million
​
Refer to Exhibit 10-2. The number of people considered to be out of the labor force is:

A)​200 million.
B)​120 million.
C)​170 million.
D)​360 million.

Question 51

The unemployment rate may overestimate the true extent of unemployment if:

A)​many part-time employees would like to work full-time, but are unable to get the additional work.
B)​many people become discouraged and cease looking for work.
C)​people falsely claim that they are actively seeking work in order to receive unemployment benefits.
D)​all of the above

Question 52

If the numbers of people officially employed and officially unemployed each increased by 10%, while the non-institutional population increased by 15%, what would be the effect?

A)​an increase in the unemployment rate and an increase in the labor force participation rate
B)​an increase in the unemployment rate and a decrease in the labor force participation rate
C)​No change in the unemployment rate and an increase in the labor force participation rate
D)​No change in the unemployment rate and a decrease in the labor force participation rate

Question 53

​Exhibit 10-1
Refer to Exhibit 10-1. From the data provided, the unemployment rate is approximately ____ percent.

A)​4.5
B)​7.7
C)​9.2
D)​5.4

Question 54

The official unemployment rate may not reflect the true state of unemployment because:

A)​Some workers may go through the motions of looking for work to keep their unemployment benefits, but not actually be looking for work.
B)​Some people who are working in the underground economy may be classified as unemployed.
C)​Some may leave the labor force and go back to school only because job conditions are currently poor.
D)​all of the above.

Question 55

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

A)​many part-time employees would like to work full-time, but are unable to get the additional work.
B)​employees increase the number of hours they work overtime.
C)​there are a large number of people working in the underground economy.
D)​any of the above occur.

Question 56

The official unemployment rate may not reflect the true state of unemployment because:

A)​part-time employees who want to work more hours are treated the same statistically as those who hold full-time jobs.
B)​some individuals who want to work may become discouraged and cease actively looking for work.
C)​workers laid off from their jobs and looking for new ones are not counted among the unemployed.
D)​(a) and (b) only.

Question 57

The total labor force consists of:

A)​the entire population.
B)​the population over the age of sixteen.
C)​the number of officially employed persons.
D)​the number of officially employed persons plus the number of officially unemployed persons.

Question 58

The unemployment rate is calculated as:

A)​the number of officially unemployed persons divided by the number of officially employed persons.
B)​the number of officially employed persons divided by the number of officially unemployed persons.
C)​the number of officially unemployed persons divided by the number of officially employed plus unemployed persons.
D)​the number of officially unemployed persons divided by the population.

Question 59

If the numbers of employed and unemployed do not change but the size of the civilian population increases by 15%, what would be the effect?

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

Question 60

The total labor force equals:

A)​the number of officially employed persons.
B)​the number of officially unemployed persons.
C)​the number of officially employed plus unemployed persons.
D)​the number of persons aged sixteen and over in the population.

Question 61

Persons who do not hold a job, but are actively seeking work are considered:

A)​out of the labor force.
B)​unemployed.
C)​unemployable, and not counted in official statistics.
D)​underemployed.

Question 62

Which of the following individuals are considered officially unemployed?

A)​a discouraged worker
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)​None of the above

Question 63

A person who works part-time is considered to be:

A)​employed.
B)​unemployed.
C)​out of the labor force.
D)​overemployed.

Question 64

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

A)​was 1.2 percent.
B)​was 2.1 percent.
C)​was 5.6 percent.
D)​was 7.1 percent.

Question 65

Kathryn chooses to go to college full-time rather than to work. Kathryn:

A)​is not part of the labor force.
B)​is part of the labor force and what economists call a discouraged worker.
C)​is part of the labor force, but not actively seeking work.
D)​is considered employed.

Question 66

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 over age 16 in the population equals 40 million, the unemployment rate equals:

A)​8 percent.
B)​20 percent.
C)​25 percent.
D)​32 percent.

Question 67

Persons who do not hold a job and are not actively seeking work are considered:

A)​out of the labor force.
B)​unemployable, and not counted in official statistics.
C)​underemployed.
D)​unemployed.

Question 68

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

A)​out of the labor force.
B)​unemployable, and not counted in official statistics.
C)​employed in leisure.
D)​underemployed.

Question 69

A discouraged worker is someone who:

A)​has a job, but wants to get a different one.
B)​is unemployed and looking for work.
C)​quits a job and is unable to collect unemployment compensation.
D)​gives up looking for work, and is no longer counted as unemployed.

Question 70

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

A)​11 percent.
B)​14.4 percent.
C)​16.8 percent.
D)​10.2 percent.

Question 71

A discouraged worker is:

A)​one who opts to quit work to attend college.
B)​one who opts to quit searching for work after unsuccessfully seeking employment.
C)​a part-time worker who would like to work more hours.
D)​none of the above.

Question 72

Parts of the unemployment rate which might increase when labor market conditions are better do include:

A)​Those who voluntarily quit existing jobs.
B)​Those who are newly entering the labor force.
C)​Those who are re-entering the labor force after leaving it earlier.
D)​All of the above.

Question 73

If the number of employed persons equals 180 million, the number of unemployed persons equals 15 million, and the number of persons over age 16 in the population equals 210 million, the unemployment rate equals ____ and the labor force participation rate equals ____.

A)​7.1%; 85.7%
B)​7.7%; 85.7%
C)​7.1%; 92.9%
D)​7.7%; 92.9%

Question 74

If a large number of individuals file unemployment claims while working in the underground economy:

A)​the unemployment rate overstates the level of unemployment.
B)​the unemployment rate understates the level of unemployment.
C)​the accuracy of the unemployment rate is not affected.
D)​discouraged worker statistics will underestimate the true state of frustration by job seekers.

Question 75

Bill looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:

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

Question 76

Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate?

A)​It would increase.
B)​It would fall.
C)​It would change, but the effect cannot be predicted.
D)​It would not change.

Question 77

A person who works 25 hours per week:

A)​is considered to be a discouraged worker.
B)​is considered to be unemployed.
C)​is considered to part of the labor force.
D)​none of the above

Question 78

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

A)​part-time workers
B)​workers temporarily laid off from jobs to which they expect to return
C)​discouraged workers
D)​all of the above

Question 79

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 4 months ago
C)​a full time student who feel that he is taking too many classes to work
D)​none of the above

Question 80

If there are discouraged workers:

A)​they are included in the official count of the unemployed.
B)​the unemployment rate will tend to overstate the true level of unemployment.
C)​the unemployment rate will tend to understate the true level of unemployment.
D)​they are considered part of the labor force.