Question 1

Most economists believe that biases cause changes in the CPI to overstate the inflation rate by ________ percentage points.

Accepted Answer

A)  0.1 to 0.2 
B)  0.2 to 2.0 
C)  0.4 
D)  0.5 to 1.0 
E)  1.0 to 3.0

Question 2

When actual inflation is less than expected inflation,

Accepted Answer

A)  borrowers lose and lenders gain. 
B)  borrowers gain and lenders lose. 
C)  borrowers and lenders both gain. 
D)  borrowers and lenders both lose.

Question 3

For the last few decades, the labor force participation rates of men have ________, and the labor force participation rates of women have ________.

Accepted Answer

A)  risen; risen 
B)  fallen; fallen 
C)  risen; fallen 
D)  fallen; risen

Question 4

Which of the following has a tendency to raise the unemployment rate?

Accepted Answer

A)  implementing a minimum wage in an economy 
B)  reducing unemployment insurance in an economy 
C)  offering wages at the market-clearing rate 
D)  reducing labor unions membership in an economy

Question 5

The nominal interest rate will be less than the real interest rate when

Accepted Answer

A)  the rate of inflation is positive but decreasing. 
B)  the rate of inflation is positive and increasing. 
C)  the rate of inflation is negative. 
D)  the real interest rate is negative.

Question 6

What is the difference between the nominal interest rate and the real interest rate?

Accepted Answer

The answer of What is the difference between the nominal...

Question 7

The nominal interest rate equals the real interest rate ________ the inflation rate.

Accepted Answer

A)  times 
B)  divided by 
C)  plus 
D)  minus

Question 8

Minimum wage laws cause unemployment because the legal minimum wage is set

Accepted Answer

A)  below the market wage, causing labor demand to be greater than labor supply. 
B)  below the market wage, causing labor demand to be less than labor supply. 
C)  above the market wage, causing labor demand to be greater than labor supply. 
D)  above the market wage, causing labor demand to be less than labor supply. 
E)  too low.

Question 9

If an economy experiences deflation, the real interest rate

Accepted Answer

A)  will be less than the nominal interest rate. 
B)  will be negative when the nominal interest rate is positive. 
C)  will be greater than the nominal interest rate. 
D)  will be equal to the deflation rate, so long as the nominal interest rate is positive.

Question 10

The average period of unemployment was ________ following the 2007-2009 recession as following any other recession since the end of World War II.

Accepted Answer

A)  three times as low 
B)  approximately the same 
C)  twice as high 
D)  eight times as high

Question 11

Table 20-19
 
-Refer to Table 20-19. Looking at the table above, what is the rate of growth of the average price level from 2012 to 2013?

Accepted Answer

A)  1% 
B)  2% 
C)  3.5% 
D)  4.76% 
E)  5.25%

Question 12

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.

Accepted Answer

A) True 
 B)False

Question 13

Describe how a lender can lose during inflation if the inflation is unanticipated and the loan is a fixed-interest-rate loan. How would a variable-interest-rate loan (one that adjusts over the contract period) eliminate these loses?

Accepted Answer

The answer of Describe how a lender can lose during...

Question 14

If cyclical unemployment is eliminated in the economy, then

Accepted Answer

A)  the economy is considered to be at full employment. 
B)  the unemployment rate is below the natural rate of unemployment. 
C)  the unemployment rate is above the natural rate of unemployment. 
D)  the economy is at less than full employment.

Question 15

The reasons why someone cannot get a job are similar to the reasons why someone cannot get a date. Using the ideas of frictionally unemployed, structurally unemployed, and cyclically unemployed, describe and explain how a student at your university might be frictionally "undated," structurally "undated," and cyclically "undated."

Accepted Answer

The answer of The reasons why someone cannot get a...

Question 16

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?

Accepted Answer

A)  unemployment rate 
B)  discouraged-worker ratio 
C)  labor force participation rate 
D)  the ratio of minimum wage to inflation

Question 17

If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are

Accepted Answer

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

Question 18

The natural rate of unemployment is made up of

Accepted Answer

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

Question 19

Cyclical unemployment is the result of

Accepted Answer

A)  a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs. 
B)  the search process of matching workers with jobs. 
C)  the ups and downs in inflation. 
D)  a slowdown in the economy.

Question 20

To reduce the bias in the consumer price index, the Bureau of Labor Statistics

Accepted Answer

A)  updates the market basket every two years, rather than every 10 years. 
B)  updates the market basket every 10 years, rather than every two years. 
C)  incorporates substitutions by consumers when prices of specific products rise rapidly. 
D)  incorporates substitutions by consumers when prices of specific products fall rapidly.

Exam 20: Unemployment and Inflation