Question 1

Suppose the price levels in an economy in four successive years are 100,120,133,and 140.Which of the following is true in such a case?

Accepted Answer

A)  The economy is experiencing hyperinflation.
B)  The economy is experiencing deflation.
C)  The economy is experiencing inflation.
D)  The economy is experiencing increasing inflation.
E)  The economy is experiencing disinflation.F) B) and D)
G) A) and D)

Question 2

Structural unemployment refers to unemployment that results from:

Accepted Answer

A)  inefficiencies in the market for labor that prolong the job search.
B)  being in the wrong geographical location.
C)  the specialization and division of labor.
D)  seasonal decreases in demand for labor.
E)  a recession in the economy.F) A) and B)
G) D) and E)

Question 3

Which of the following is not a cost of unemployment?

Accepted Answer

A)  A loss of income
B)  Emotional or psychological problems
C)  Loss of job skills
D)  A decrease in production
E)  Higher annual inflation ratesF) A) and B)
G) B) and D)

Question 4

The inflation experienced in the United States during the 1970s as a result of OPEC oil price increases is an example of:

Accepted Answer

A)  demand-pull inflation.
B)  hyperinflation.
C)  cost-push inflation.
D)  cyclical inflation.
E)  disinflation.F) All of the above
G) None of the above

Question 5

The unemployment rate does not reflect the true extent of the unemployment problem.Which of the following groups is not counted as unemployed in the official unemployment statistics?

Accepted Answer

A)  The underemployed and the cyclically unemployed
B)  The underemployed and discouraged workers
C)  Discouraged workers and the frictionally unemployed
D)  The frictionally unemployed and the structurally unemployed
E)  The cyclically unemployed and the frictionally unemployedF) C) and D)
G) A) and B)

Question 6

In recent times,there has been a decline in the sale of newspapers in the U.S.as people prefer to read the news on the internet.This has caused many newspaper journalists to lose their jobs.This is an example of:

Accepted Answer

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

Question 7

If the inflation rate in an economy is 5 percent and the income earned by workers increases by 5 percent,then _____.

Accepted Answer

A)  nominal income declines and real income increases
B)  both nominal income and real income increase by 5 percent
C)  nominal income increases and real income declines
D)  both nominal income and real income decrease by 5 percent
E)  nominal income increases by 5 percent and real income is unchangedF) B) and E)
G) All of the above

Question 8

Which type of unemployment is likely to increase the most during an economy's recession?

Accepted Answer

A)  Frictional unemployment
B)  Seasonal unemployment
C)  Structural unemployment
D)  Cyclical unemployment
E)  UnderemploymentF) B) and D)
G) A) and E)

Question 9

If future price changes were perfectly anticipated by both borrowers and lenders,then _____.

Accepted Answer

A)  the expected real interest rate would be higher than the actual rate
B)  the expected real interest rate would lower than the actual rate
C)  the real interest rate in the future would decrease by the amount of the price increase
D)  the real interest rate in the future would increase by the amount of the price increase
E)  the real interest rate in the future would remain unchangedF) A) and B)
G) C) and D)

Question 10

The higher the expected inflation,_____.

Accepted Answer

A)  the higher the nominal rate of interest that lenders require and that borrowers are willing to pay
B)  the lower the nominal rate of interest that lenders require and that borrowers are willing to pay
C)  the higher the nominal rate of interest that lenders require and the lower the nominal rate of interest that borrowers are willing to pay
D)  the higher the real interest rate that lenders require
E)  the higher the real interest rate that borrowers are willing to payF) A) and C)
G) C) and E)

Question 11

Unanticipated inflation generally hurts borrowers and benefits lenders.

Accepted Answer

A) True 
 B)False

Question 12

A major cost of unemployment is lost production.

Accepted Answer

A) True 
 B)False

Question 13

Cost-push inflation:

Accepted Answer

A)  occurs when the aggregate demand curve shifts rightward.
B)  occurs when the aggregate supply curve shifts rightward.
C)  results in a decrease in the unemployment rate.
D)  results in a movement along the aggregate demand curve.
E)  is caused by the same factors that lead to demand-pull inflation.F) A) and E)
G) D) and E)

Question 14

The labor force in an economy consists of all:

Accepted Answer

A)  the people in the economy who are not retired.
B)  the people in the economy over 16 years of age.
C)  the adults in the economy between 18 and 65 years old who are able to work.
D)  the civilian noninstitutional adult population that is either working or looking for work.
E)  the noninstitutional adult population who are graduates of high school.F) B) and C)
G) A) and E)

Question 15

A discouraged worker is one who:

Accepted Answer

A)  is underqualified for his current job.
B)  dislikes his current job but is afraid to quit.
C)  drops out of the labor force because he cannot find a job.
D)  quits his job because the possibility of advancement was very low.
E)  is overqualified for his current job.F) B) and E)
G) A) and E)

Question 16

Which of the following decades was characterized by the highest inflation rate in the U.S.?

Accepted Answer

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

Question 17

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)  the 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) B) and D)
G) A) and E)

Question 18

Relative prices describe the terms at which individual goods are exchanged for one another.

Accepted Answer

A) True 
 B)False

Question 19

Tony lent Dave $1,000 for one year with the understanding that Dave would repay $1,070.If the actual inflation rate was 7 percent,then the real rate of interest Tony received is _____.

Accepted Answer

A)  14 percent
B)  7 percent
C)  4 percent
D)  0 percent
E)  −7 percentF) A) and D)
G) A) and C)

Question 20

In an economy,U = the number of adults who are unemployed,E = the number of adults who are employed,and NLF = the number of adults not in the labor force.The labor force participation rate in the economy is equal to:

Accepted Answer

A)  U/(U + 
E)  .
B)  E/(U + 
E)  .
C)  U/(U + E + NLF) .
D)  E/(U + E + NLF) .
E)  (U + 
E)  /(U + E + NLF) .F) All of the above
G) A) and C)

Exam 7: Unemployment and Inflation

The unemployment rate does not reflect the true extent of the unemployment problem.Which of the following groups is not counted as unemployed in the official unemployment statistics?

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Structural unemployment refers to unemployment that results from:

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If future price changes were perfectly anticipated by both borrowers and lenders,then _____.

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Unanticipated inflation generally hurts borrowers and benefits lenders.

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If the inflation rate in an economy is 5 percent and the income earned by workers increases by 5 percent,then _____.

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Cost-push inflation:

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Suppose the price levels in an economy in four successive years are 100,120,133,and 140.Which of the following is true in such a case?

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Which type of unemployment is likely to increase the most during an economy's recession?

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Which of the following decades was characterized by the highest inflation rate in the U.S.?

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In an economy,U = the number of adults who are unemployed,E = the number of adults who are employed,and NLF = the number of adults not in the labor force.The labor force participation rate in the economy is equal to:

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Which of the following is not a cost of unemployment?

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The higher the expected inflation,_____.

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A discouraged worker is one who:

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A major cost of unemployment is lost production.

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Relative prices describe the terms at which individual goods are exchanged for one another.

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Tony lent Dave $1,000 for one year with the understanding that Dave would repay $1,070.If the actual inflation rate was 7 percent,then the real rate of interest Tony received is _____.

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A worker would be hurt least by inflation when the:

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The labor force in an economy consists of all:

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The inflation experienced in the United States during the 1970s as a result of OPEC oil price increases is an example of:

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In recent times,there has been a decline in the sale of newspapers in the U.S.as people prefer to read the news on the internet.This has caused many newspaper journalists to lose their jobs.This is an example of:

Correct AnswerverifiedShow Answer

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