question

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

answer

labor force participation rate

question

In the modern US economy, the typical unemployed person stays unemployed for

answer

a relatively short time, less than six months

question

If the price level rose in three consecutive hers from 100 to 120 to 140, then the annual inflation rate over those years would

answer

decrease

question

Suppose you lend $1,000 at an interest rate of 10% over the next year. If the expected real interest rate at the beginning of the loan contract is 4%, then what rate of inflation over the upcoming year would be most beneficial to you as the lender?

answer

equal to 0%

question

Assume the average annual CPI values for 2010 and 2011 were 207.3 and 215.3, respectively. What was the percent increase in the CPI between these two years?

answer

3.86

question

Suppose you borrow $1,000 at an interest rate of 12%. If the expected real interest rate is 5%, then the rate of inflation over the upcoming year that would be mot beneficial to you would be a rate of inflation

answer

greater than 7%

question

The Bureau of Labor Statistics would categorize a retiree who is not working as

answer

out of the labor force

question

Which of the following would decrease the unemployment rate

answer

government aid to retrain unemployed workers

question

The labor force equals the number of people

answer

employed plus unemployment

question

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid

answer

3%

question

When deflation occurs

answer

the real interest rate is greater than the nominal interest rate

question

Efficiency wages cause unemployment because

answer

firms pay wages that are above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied

question

Using a broader measure of the unemployment rate where discouraged workers and part-time workers who wished to work full time were counted as unemployed, the BLS estimates the unemployment rate in September 2011 would have _____ compared to the measured unemployment rate

answer

increased by more than 7 percentage points

question

An advantage of the establishment survey over the household survey of the labor marker is that the establishment survey

answer

is based on actual payrolls, rather than on unverified answers

question

The recession of 2007-2009 and its aftermath had different effects on various sectors of the economy. Which of the following sectors of the US economy had the highest unemployment rate in August 2011, topping 12%

answer

construction

question

Which of the following policies would reduce frictional unemployment

answer

building an online job database that helps workers find jobs

question

The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is

answer

vertical

question

If inflation is positive and is perfectly anticipated

answer

those that hold paper money lose

question

The increased generosity of unemployment insurance programs in Canada as compared to the United States should

answer

increase the duration of unemployment in Canada as compared to the United States

question

Suppose that in 2012, all prices in the economy double and that all wages and salaries have also doubled. In 2012 you

answer

are no better off or worse off than you were in 2011 as the purchasing power of your salary has remained the same

question

The advice to "retain" would be most appropriate for which of the following types of unemployment

answer

structural unemployment

question

You earned $30,000 in 1990, and your salary rose to $80,000 in 2011. If the CPI rose from 82 to 202 between 1990 and 2011, which of the following is true

answer

the purchasing power of your salary increased between 1990 and 2011

question

If the nominal rate of interest is 6.5% and the inflation is 3% what is the real rate of interest

answer

3.5%

question

Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about

answer

one half to one percentage point

question

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

answer

above market wage, causing labor demanded to be less than labor supply

question

Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated

answer

firms have to hire an extra worker to change prices in its store because of inflation

question

Suppose the government launches a successful advertising campaign that convokes workers with high school degrees to quit their jobs and become full time college students. This would cause

answer

the labor force participation rate to decrease

question

The BLS would categorize a person as _____ if they were temporarily away from their job because they were ill

answer

employed

question

If firms pay what are called "efficiency wages", they pay wages that

answer

motivate workers to increase their productivity

question

Since 1948, the labor force participation rate for adult men has ____ and for adult women has ____

answer

decreased; increased

question

If the BLS counted persons that are on active military service in the totals for employment, the labor force, or the working age population, this would

answer

decrease the measured unemployment rate

question

An unemployment insurance program has which of the following effects

answer

it increases the amount of time spent searching for a job

question

Which of the following is true about the consumer price index

answer

it assumes that consumers purchase the same amount of each product in the market basket each month

question

The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect

answer

that stock prices are more likely to fall

question

In September 2011, Bank of America laid of 30,000 employees. The laid off employees were not able to find jobs at an other bank due to a permanent decline in business in the financial industry would be considered

answer

structurally unemployed

question

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

answer

not in labor force

question

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation; but _____ quality increases. This causes the CPI to ____ the cost of the market basket

answer

not; overstate

question

An increase in unemployment insurance payments would in effect, ____ the amount of time spent searching for a job which would increase ____ unemployment

answer

increase; frictional

question

Which of the following describes a situation in which the person is hurt by inflation

answer

a person paid a fixed income during an inflationary period

question

Labor force participation is what formula

answer

employment/total (un)employment *100

question

If the minimum wage is set above the market wage

answer

unemployment will rise

question

Which of the following policies would reduce structural unemployment

answer

job retaining program

question

The nominal interest rate equals the real interest rate ___ the inflation rate

answer

plus

question

The real wage equals the nominal wage ____ the CPI, all times 100

answer

divided by

question

During the Great Depresison, cyclical unemployment increased as the recession continued. This increase is cyclical unemployment

answer

had no effect on the natural rate of unemployment

question

Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would

answer

increase the measured labor force participation rate

question

Which of the following price indices comes closest to measuring the cost of living of the typical household

answer

consumer price index

question

The producer price index measures the prices that firms

answer

receive for the goods and services they use at all stages of production

question

Which of the following would increase the unemployment rate

answer

an increase in unemployment insurance payments

question

WHen actual inflation is less than expected inflation

answer

borrowers lose and lenders gain

question

The substitution bias in the consumer price index refers to the idea that consumers ____ the quantity of products they buy in response to price, and the CPI does not reflect this and ___ the cost of the market basket

answer

change; over estimates

question

An advantage of the household survey over the establishment survey of the labor market is that the household survey

answer

includes the number of self employed persons

question

Suppose that at the beginning of a loan contract, the real interest rate is 4% and expected inflation is currently 6%. If actual inflation turns out to be 7% over the loan contract period, then

answer

borrowers gain 1% of the loan value

question

After the recession of 2007-2009, the unemployment rate peaked at 10.1% in October 2009. 23 months later, it had

answer

declined by only 1% point

question

The real interest rat equals the nominal interest rate ____ the inflation rate

answer

minus

question

Suppose the labor force stays constant, and the working age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will

answer

remain constant

question

The average period of unemployment was ____ following the 2007-2009 recession as following any other recession since the end of World War 2

answer

twice as high

question

The natural rate of unemployment is the amount of unemployment

answer

associated with the business cycle

question

Structural unemployment is the result of

answer

a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs

question

Which of the following explains the changes in the US adult male labor force participation rate since 1948

answer

younger men are remaining in school longer as compared to the past

question

To reduce the bias in the consumer price index, the BLS

answer

updates the market basket every 2 years, rather than every 10

question

Formula for unemployment rate

answer

(unemployment/ employment) *100

question

Which of the following would be a consequence of substitution bias in the CPI

answer

businesses would over compensate employees for inflation when giving the cost of living rises

question

According to the text, economists consider full employment to occur when

answer

the unemployment rate consists only of frictional and structural unemployment

question

The cost to firms of changing prices

answer

is a menu cost

question

The average price of goods and services in the economy is also known as

answer

price level

question

Frictional unemployment is a result of

answer

the search process of matching workers with jobs

question

The unemployment rate equals the number of unemployed divided by the ____, all times 100

answer

labor force

question

Most of the unemployment that occurred during the Great Depression was

answer

cyclical unemployment

question

If your nominal wage rises faster then the price level, we can say your real wage has _____ and the purchasing power of your income has _____

answer

risen; risen

question

Which of the following cause the unemployment rate as measured by BLS to understate the true extent of joblessness

answer

discouraged workers

question

Full employment is not considered to be zero unemployment because

answer

people do not find jobs instantaneously

question

A student who just graduated from college but has not yet found a job would most likely be

answer

frictionally unemployed

question

Suppose that the labor movement has a revival in the US and the majority of workers join labor unions. As as result we would expect

answer

the unemployment rate to rise

question

The economy has gone into recession. You have majored in computer science and have difficulty finding a job. Should you go back to school and get a second major

answer

No, recession will most likely be short lived and you can find a job afterwards

question

Based in part on the aftermath of the financial crisis that began in 2008 and the speed of the recovery of the U.S. economy following the recession of 2007-2009, Bank of America ________ the number of persons it employed in September 2011 and this ________ the total number of persons unemployed in the economy.

answer

decreased; increased

question

Which of the following would be the best measure of the cost of living

answer

consumer price index

question

The Bureau of Labor Statistics has taken several steps to reduce the bias in the consumer price index. following is not one of the steps taken to reduce the bias?

answer

incorporating substitutions by consumers when prices of specific products rise rapidly

question

A lumberjack loses his job because timber cutting restrictions were imposed by the EPA to protect the spotted owl habitat. This lumberjack would be

answer

structurally unemployed

question

If cyclical unemployment is eliminated in the economy then

answer

the economy is considered to be at full employment

question

The advice to "keep searching, there are plenty of jobs around here for which you are qualified" would be most appropriate for which of the following types of unemployment

answer

frictional unemployment

question

The "new product bias" in the consumer price index refers to the idea that

answer

new products prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers

question

Cyclical unemployment is the result of

answer

a slowdown in the economy

question

WHen prices are rising, which of the following will be true

answer

The real interest rate will be lower than the nominal interest rate

question

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?

answer

unemployed persons falsely report themselves to be actively looking for a job

question

If the federal government implements programs so that the unemployed are more quickly matched with jobs, then

answer

the natural rate of unemployment will decrease.

question

Which of the following statements is true about the U.S. economy?

answer

Each year, many new jobs are created and many existing jobs are destroyed.

question

The labor force participation rate equals the

answer

(labor force divided by working-age population) × 100.

question

The consumer price index is the

answer

average of the prices of the goods and services purchased by a typical urban family of four.

question

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

answer

cyclically unemployed.

question

If an economy experiences deflation, the real interest rate

answer

will be greater than the nominal interest rate

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