Question 1

Which of the following factors makes the official unemployment rate an overstatement of the actual level of unemployment in an economy?

Accepted Answer

A)   inclusion of discouraged workers
B)   inclusion of those only working part time
C)   inclusion of those who are overqualified for their current jobs
D)   inclusion of those who are marginally attached to the labor force
E)   inclusion of those who pretend to look for work in order to qualify for welfare programsF) A) and D)
G) C) and D)

Question 2

Since World War II, the consumer price index (CPI)  has increased by an average of _____

Accepted Answer

A)   1.4 percent per year.
B)   2.1 percent per year.
C)   6.4 percent per year.
D)   5.6 percent per year.
E)   3.5 percent per year.F) A) and E)
G) B) and E)

Question 3

A major cost of unemployment is lost production.

Accepted Answer

A) True 
 B)False

Question 4

A decrease in the interest rate, other things constant, will _____

Accepted Answer

A)   shift the demand for loanable funds curve to the right.
B)   shift the demand for loanable funds curve to the left.
C)   increase the quantity of loanable funds demanded.
D)   increase the quantity of loanable funds supplied.
E)   shift the supply of loanable funds curve to the right.F) All of the above
G) A) and B)

Question 5

Suppose there is a 5 percent increase in the nominal wages of workers in an economy. The annual rate of inflation in the economy is about 2 percent. Which of the following is true?

Accepted Answer

A)   Real wages would fall by about 10 percent.
B)   Real wages would increase by about 20 percent.
C)   Real wages would fall by about 25 percent.
D)   Real wages would increase by about 50 percent.
E)   Real wages would increase by about 3 percent.F) D) and E)
G) A) and B)

Question 6

Since the end of World War II, the U.S. price level has _____

Accepted Answer

A)   increased tenfold.
B)   increased by an average of 10 percent each year.
C)   increased and decreased with equal regularity, leaving the price level almost constant.
D)   increased by 50 percent.
E)   doubled.F) None of the above
G) A) and E)

Question 7

People who are not currently employed but say they want a job are counted as unemployed only if they _____

Accepted Answer

A)   have previously held a job.
B)   are actively seeking employment.
C)   are discouraged workers.
D)   are between 16 and 65 years of age.
E)   are willing to accept any offer of employment.F) C) and E)
G) B) and C)

Question 8

An increase in the demand for loanable funds, other things constant, will increase the interest rate.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following does not exist when an economy is operating at full employment?

Accepted Answer

A)   an unemployment rate of 5 percent or 6 percent
B)   seasonal unemployment
C)   structural unemployment
D)   cyclical unemployment
E)   frictional unemploymentF) A) and B)
G) B) and C)

Question 10

Which of the following periods in U.S. economic history was not characterized by inflation?

Accepted Answer

A)   1917-1920
B)   1929-1933 and 2009
C)   1947
D)   1978-1980
E)   1980-1989F) A) and E)
G) A) and D)

Question 11

In periods of high inflation, _____

Accepted Answer

A)   people want to hold as much money as possible.
B)   the purchasing power of money decreases.
C)   the real interest rate exceeds the nominal interest rate.
D)   the nominal interest rates are likely to be low.
E)   the nominal interest rate equals the real interest rate.F) A) and B)
G) A) and C)

Question 12

Which of the following people would be counted among the unemployed?

Accepted Answer

A)   a new college graduate selling newspaper advertisements part time while looking for other work
B)   a new college graduate selling newspaper advertisements full time while looking for other work
C)   a new college graduate selling newspaper advertisements part time and not looking for other work
D)   a new college graduate who gets tired of selling newspaper advertisements and takes off on a motorcycle trip to Alaska
E)   a new college graduate not qualified for any of the jobs available in his small townF) A) and E)
G) A) and D)

Question 13

The best example of a frictionally unemployed worker is one who _____

Accepted Answer

A)   has been looking for work for 27 weeks or longer.
B)   is laid off during a recessionary period in an economy.
C)   is in the process of voluntarily switching jobs.
D)   is discouraged and not actively seeking work.
E)   cannot find a job that matches with his skills.F) C) and D)
G) C) and E)

Question 14

The consumer price index measures _____

Accepted Answer

A)   the cost of all goods and services produced in the U.S. economy.
B)   the average change over time in the selling prices received by domestic producers for their output.
C)   the cost of a fixed market basket of consumer goods and services produced in the U.S. economy.
D)   the ratio of an economy's nominal GDP to its real GDP.
E)   the income distribution of an economy.F) A) and D)
G) B) and E)

Question 15

A person whose skills do not match available job openings is considered frictionally unemployed.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following decades was characterized by the highest inflation rate in the United States?

Accepted Answer

A)   the 1920s
B)   the 1930s
C)   the 1950s
D)   the 1970s
E)   the 1960sF) A) and C)
G) C) and E)

Question 17

Uncertainty about inflation _____

Accepted Answer

A)   shifts the attention of business managers away from exchange rate movements and toward concerns about productivity.
B)   reduces the difficulty of making international business decisions.
C)   make suppliers link the selling prices of their goods to the overall inflation rate.
D)   undermines money's importance as a link between the present and the future.
E)   makes contracts easier to negotiate.F) C) and D)
G) D) and E)

Question 18

An individual with a Ph.D. in physics who can find employment only in a pizza parlor would be considered _____

Accepted Answer

A)   discouraged.
B)   underemployed.
C)   overemployed.
D)   voluntarily unemployed.
E)   long-term unemployed.F) B) and E)
G) A) and E)

Question 19

A worker would be hurt least by inflation when the _____

Accepted Answer

A)   worker anticipates inflation and increases savings at the bank.
B)   worker is protected by a cost-of-living adjustment clause in an employment contract.
C)   price level increases but at a decreasing rate.
D)   worker is protected by fixed annual increases in wages and benefits in an employment contract.
E)   government increases the level of social security retirement benefits to correct for the effects of unanticipated inflation.F) A) and E)
G) A) and B)

Question 20

The quantity and quality of data used to measure inflation varies across countries because of _____

Accepted Answer

A)   the sampling of fewer products and measuring prices outside the capital city.
B)   the sampling of fewer products and measuring prices only in the capital city.
C)   the sampling of more products and measuring prices outside the capital city.
D)   the sampling of more products and measuring prices only in the capital city.
E)   the fact that inflation is not an important measure in some countries.F) C) and D)
G) A) and C)

Exam 7: Unemployment and Inflation.

The best example of a frictionally unemployed worker is one who _____

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Since World War II, the consumer price index (CPI) has increased by an average of _____

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Which of the following periods in U.S. economic history was not characterized by inflation?

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The quantity and quality of data used to measure inflation varies across countries because of _____

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People who are not currently employed but say they want a job are counted as unemployed only if they _____

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Which of the following decades was characterized by the highest inflation rate in the United States?

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Uncertainty about inflation _____

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Which of the following people would be counted among the unemployed?

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An individual with a Ph.D. in physics who can find employment only in a pizza parlor would be considered _____

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A worker would be hurt least by inflation when the _____

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Since the end of World War II, the U.S. price level has _____

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A person whose skills do not match available job openings is considered frictionally unemployed.

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The consumer price index measures _____

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A decrease in the interest rate, other things constant, will _____

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In periods of high inflation, _____

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Suppose there is a 5 percent increase in the nominal wages of workers in an economy. The annual rate of inflation in the economy is about 2 percent. Which of the following is true?

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Which of the following factors makes the official unemployment rate an overstatement of the actual level of unemployment in an economy?

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Which of the following does not exist when an economy is operating at full employment?

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A major cost of unemployment is lost production.

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An increase in the demand for loanable funds, other things constant, will increase the interest rate.

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