Chapter 8

9) Suppose there are currently 100 people unemployed, 1500 people employed, 1600 people in the labor force, and 2000 people in the working age population. The unemployment rate equals 100 times A) 100/1600. B) 100/2000. C) 1500/2000. D) 100/1500.

A) 100/1600

24) If unemployment equals the natural unemployment rate, then there A) is only frictional or structural unemployment. B) is zero unemployment. C) is less than full employment. D) are no job openings existing at the time.

A) is only frictional or structural unemployment

3) The ________ equals the number of ________. A) labor force; unemployed and employed persons B) unemployment rate; people unemployed C) labor force; persons over 16 years old D) working age population; employed persons

A) labor force; unemployed and employed persons

Category Number (millions) Discouraged workers 15 Unemployed workers 40 Employed workers 100 Population (16 years and over) 225 2) In the above table, the size of the labor force is A) 140 million. B) 210 million. C) 155 million. D) 100 million.

A) 140 million.

32) If the CPI was 132.5 at the end of last year and 137.5 at the end of this year, the inflation rate over these two years was A) 3.8 percent. B) 5.0 percent. C) 3.6 percent. D) None of the above answers is correct.

A) 3.8 percent

33) If the CPI is 120, this means that A) prices are 0.12 times higher than in the reference base period. B) the inflation rate must be positive. C) prices are 20 percent higher than in the reference base period. D) prices are 120 percent higher than in the reference base period

C) prices are 20 percent higher than in the reference base period.

44) The cost of inflation to society includes A) higher interest rates paid by borrowers. B) higher interest rates paid by the government on its debt. C) unpredictable changes in the value of money. D) the lost spending when people do not have enough money.

C) unpredictable changes in the value of money.

40) Unpredictable changes in the value of money, which brings about gains and losses, are a consequence of unpredictable changes in A) productivity. B) unemployment rate. C) inflation. D) real GDP.

C) inflation

17) When more labor is unemployed than the amount at the natural unemployment rate, then real GDP ________ potential GDP. A) is greater than B) is equal to C) is less than D) cannot be compared to

C) is less than

CPI basket quantity 2003 price 2011 price DVDs 10 discs $16 per disc $12 per disc Bottled water 200 bottles $1.00 per bottle $1.25 per bottle 43) If 2003 is the reference base period, what is the price index for the CPI basket of goods for 2011 in the above table? A) 102.8 B) 97.3 C) 128.0 D) zero because the price of CDs fell and the price of water increased

A) 102.8

31) If the CPI was 121.5 at the end of last year and 138.3 at the end of this year, the inflation rate over these two years was A) 13.8 percent. B) 10.2 percent. C) 12.2 percent. D) 16.8 percent

A) 13.8 percent

Year Price Level 2008 91 2009 100 2010 110 2011 121 38) In the above table, the inflation rate between 2008 and 2009 is approximately A) 1 percent. B) 10 percent. C) 100 percent. D) 0.9 percent.

B) 10 percent.

15) Which of the following people would be considered unemployed by the Bureau of Labor Statistics? I. Mrs. X retires from her job at the age of 55 and does not look for another job. II. Mr. Y was laid off from his job as a welder, but expects to be rehired in 8 months. A) I only B) II only C) both I and II D) neither I nor II

B) II only

1) The percentage of the people of working age who have jobs is called the ________. A) inverse of the unemployment rate B) employment-to-population ratio C) employment-to-working-age-population ratio D) labor force

B) employment-to-population ratio

27) Catherine quit her job in order to look for a new one; therefore, she is best considered as A) cyclically unemployed. B) frictionally unemployed. C) seasonally unemployed. D) structurally unemployed.

B) frictionally unemployed.

34) An increase in the price level is defined as A) a recession. B) inflation. C) an expansion. D) a growth boom.

B) inflation.

37) If the CPI for this year is 220 and the CPI for last year was 215, the inflation rate is A) 5 percent. B) just over 2 percent. C) just over 5 percent. D) 10 percent

B) just over 2 percent.

30) Frictional unemployment comes about because of A) friction between labor and management. B) normal labor market turnover. C) a general economic slowdown. D) a mismatch between skills and available jobs.

B) normal labor market turnover

11) The unemployment rate equals A) (number of people employed/working age population) × 100. B) (labor force/working age population) × 100. C) (number of people unemployed/labor force) × 100. D) (number of people employed/number of people age 16 and over) × 100.

C) (number of people unemployed/labor force) × 100.

5) If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the labor force is A) 1500. B) 1000. C) 1100. D) 1400.

C) 1100

41) If the CPI at the end of last year was 100 and the CPI at the end of this year was 115, the inflation rate was A) 100 percent. B) 115 percent. C) 1.5 percent. D) 15 percent.

D) 15 percent.

Year Price index Inflation rate (percent) 1 100 2 117 A 3 125 B 4 120 C 5 D 8.3 6 150 E 39) In the table above, what inflation rate belongs in space A? A) -4.0 percent B) 6.8 percent C) 8.3 percent D) 17.0 percent

D) 17.0 percent

14) Suppose there are 100 million in the labor force, and 6 million unemployed people. During the next month, 200,000 people lose their jobs and 300,000 find jobs. The new total of employed persons is ________ and the new unemployment rate is ________. A) 100.1 million; 5.8 percent B) 100 million; 6.1 percent C) 93.9 million; 6.1 percent D) 94.1 million; 5.9 percent

D) 94.1 million; 5.9 percent

20) Which of the following individuals is the best example of a structurally unemployed worker? A) an automobile worker who has lost her job because of an increase in automobile imports and does not have the skills currently needed by businesses B) a recent college graduate who has entered the labor force C) an individual who has been laid off from his job because of a business cycle recession D) an individual who quits one job in the hope of finding a better job

A) an automobile worker who has lost her job because of an increase in automobile imports and does not have the skills currently needed by businesses

28) When a worker quits a job to look for a better job, A) frictional unemployment increases. B) cyclical unemployment increases. C) structural and cyclical unemployment increase. D) structural unemployment decreases.

A) frictional unemployment increases

42) The currently used method for calculating the CPI A) probably overstates inflation by about 1 percentage point. B) has no effect on government expenditures. C) accounts for people increasing consumption of a good that falls in relative price. D) None of the above answers are correct.

A) probably overstates inflation by about 1 percentage point.

7) The unemployment rate equals the number of A) unemployed workers divided by the labor force then multiplied by 100. B) unemployed workers divided by the population then multiplied by 100. C) unemployed workers divided by the number of employed workers then multiplied by 100. D) unemployed workers multiplied by 100.

A) unemployed workers divided by the labor force then multiplied by 100.

19) When the automobile replaced horse-drawn carriages as the principal means of transportation, firms producing horsedrawn carriages went bankrupt and permanently laid off all their workers, thereby increasing A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) frictional and cyclical unemployment.

B) structural unemployment.

6) The unemployment rate is found by dividing the number of unemployed people by the A) number of the working-age population, and multiplying by 100. B) sum of working individuals plus unemployed workers, and multiplying by 100. C) number in the labor force, and dividing by 100. D) number of working individuals, and multiplying by 100.

B) sum of working individuals plus unemployed workers, and multiplying by 100.

35) The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year is ________. A) 140 B) 1.60 C) 160 D) 62.5

C) 160

Total population (millions) 80 Currently employed 40 (millions) Not working and looking for work 2 (millions) Want to work but no longer looking for work 4 (millions) 8) In the table above, the number of people officially unemployed is ________. A) 4 million B) 6 million C) 2 million D) 40 million

C) 2 million

Component Number of people (millions) Total population 246 Working-age population 207 Labor force 139 Employed 133 Unemployed 6 4) Using the information in the above table, the unemployment rate is A) 6.0 percent. B) 2.8 percent. C) 4.3 percent. D) 4.5 percent.

C) 4.3 percent.

Year Price index Inflation rate (percent) 1 100 2 117 A 3 125 B 4 120 C 5 D 8.3 6 150 E 36) In the table above, what inflation rate belongs in space B? A) 8.3 percent B) -4.0 percent C) 6.8 percent D) 17.0 percent

C) 6.8 percent

45) If this year the price level is 135 and last year it was 125, the inflation rate is A) 12 percent. B) 10 percent. C) 8 percent. D) none of the above

C) 8 percent.

Person A-Now that the kids are in school for a full day, this person is looking for work and has interviewed for three jobs during the past two weeks. Person B-This person has been laid off from a job but expects to be called back as soon as the economy improves. Person C-This person has just graduated from college and will start a new job in three weeks. In the meantime this person will tour the great American beaches. Person D-This person was laid off last year when new equipment was installed at the plant, reducing the number of workers needed. Shortly after being laid off, this person looked for a new job, was unable to find one and then stopped looking, even though this person still wants a job and is available for work. 10) The above table shows answers given by people interviewed in a government survey of households. Which individual or individuals are considered marginally attached? A) A B) B, C, and D C) D D) A and D

C) Person D

21) Frictional unemployment is the result of A) a slowdown in the rate of economic expansion. B) technological change or foreign competition. C) normal labor market turnover. D) irresponsible workers with poor work habits.

C) normal labor market turnover

Person A This person has just graduated from high school and is working at a part-time job but wants a full-time job. Person B At the age of 45, this person was laid off from the automobile industry when new equipment was installed and the person did not have the skills necessary to use the equipment. This person now is searching to find a new job. Person C As a result of this person's spouse being transferred to a job in a new city, this person is looking for a new job. Person D This person just graduated from college and is looking for an engineering job. In the meantime, this person is working full-time waiting tables. 23) The above table shows answers given by people interviewed in the Current Population Survey. Which person is cyclically unemployed? A) A B) B C) C D) None of the people

D) None of the people

18) If a worker is temporarily laid off because the economy is in a recession, A) structural unemployment increases. B) the size of the labor force rises. C) frictional unemployment increases. D) cyclical unemployment increases.

D) cyclical unemployment increases.

29) Mike has just been laid off from his construction job because consumers are not purchasing new homes because of the recession. Mike would be considered to be part of A) structural unemployment. B) frictional unemployment. C) seasonal unemployment. D) cyclical unemployment.

D) cyclical unemployment.

13) All people in the working-age population can be divided into A) potential employees. B) labor force participants. C) either over-employed or under-employed. D) employed, unemployed, or not in the labor force.

D) employed, unemployed, or not in the labor force.

22) The primary factor leading to cyclical unemployment is when A) businesses often discriminate in their hiring practices on the basis of age, sex, and race. B) some workers do not have marketable job skills. C) workers quit their jobs in order to look for higher paying employment. D) the level of overall economic activity fluctuates.

D) the level of overall economic activity fluctuates.

25) When cyclical unemployment is zero, A) frictional unemployment is zero. B) structural unemployment is zero. C) cyclical and frictional unemployment are zero. D) the unemployment rate equals the natural unemployment rate.

D) the unemployment rate equals the natural unemployment rate.

26) Frictional unemployment is A) unemployment associated with declining industries. B) long-term unemployment. C) unemployment associated with business cycle recessions. D) unemployment associated with the changing of jobs in a changing economy.

D) unemployment associated with the changing of jobs in a changing economy.

16) Frictional unemployment includes A) unemployment caused by automation of the work place that displaces unskilled workers. B) unemployment caused by a lack of education so that workers do not possess necessary job skills. C) unemployment caused by industries moving overseas to better meet foreign competition. D) unemployment caused by normal labor turnover associated with people leaving and entering the labor force.

D) unemployment caused by normal labor turnover associated with people leaving and entering the labor force.

12) The labor force participation rate is percentage of the ________ who are in the labor force. A) population B) people under age 65 C) people over age 16 D) working-age population

D) working-age population