ECO 202 Chapter 9

What formula does the Bureau of Labor Statistics use to calculate the unemployment rate?

(Number of unemployed / Number in labor force) X 100

How does the U.S. economy create and destroy millions of jobs each​ year? ​(Mark all that​ apply.) A. Some businesses are​ expanding, while others are contracting. B. The federal government determines that certain industries are obsolete and closes firms. C. In the market​ system, new firms are constantly entering and exiting various industries. D. When unemployment is​ high, the federal government hires more workers to offset the effects of unemployment.

A, C

Inflation can affect the distribution of income because A. people with incomes rising faster than the rate of inflation enjoy an increasing purchasing​ power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power. B. people with fixed​ incomes, such as retired persons who may be receiving a pension of a fixed number of dollars each​ year, are not affected by the inflation​ rate, but people with varying incomes are. C. when inflation is fully​ anticipated, mortgage lenders face very high default risk. D. people with incomes rising slower than the rate of inflation enjoy an increasing purchasing​ power, while people with incomes rising more quickly than the rate of inflation are hurt by a decreasing purchasing power.

A. people with incomes rising faster than the rate of inflation enjoy an increasing purchasing​ power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power.

When the economy is at full​ employment, which types of unemployment​ remain? A. frictional and structural B. cyclical and structural C. frictional and cyclical D. None of the above. Full employment means that there is no​ unemployment, so the unemployment rate would be zero

A. Frictional and Structural

Which one of the following is not a measure of the price​ level? A. Government Price​ Index: an average of the prices paid by the government for goods and services used only by different government agencies. B. Consumer Price​ Index: an average of the prices of goods and services a typical family of four would purchase. C. Producer Price​ Index: an average of prices received by firms for goods and services at all stages of production. D. GDP​ Deflator: broadest measure of the average price level as it includes prices of every final good and service.

A. Government Price Index

An efficiency wage is A. a​ below-market wage paid by a firm to maximize firm profits. B. an​ above-market wage paid by a firm to maximize worker productivity. C. an​ above-market wage paid by a firm to maximize the output of the firm. D. equal to the​ market-clearing wage, so that social welfare is maximized

B. an​ above-market wage paid by a firm to maximize worker productivity.

When​ Ségolène Royal was running unsuccessfully for president of​ France, she proposed that workers who lost their jobs would receive unemployment payments equal to 90 percent of their previous wages during their first year of unemployment. A. would have gone up as people from other countries would migrate to France because of their generous unemployment insurance. B. would have gone up as the opportunity cost of job search would have decreased. C. would have stayed the same because unemployment insurance programs do not affect the unemployment rate. D. would have gone down as the opportunity cost of job search would have increased

B. would have gone up as the opportunity cost of job search would have decreased.

The unemployment rate A. is the amount of people in the population that are not working. B. shows the percentage of the labor force that is considered unemployed. C. is the amount of the labor force that is not working. D. shows the percentage of the population that is considered unemployed.

B. Shows the percentage of the labor force that is considered unemployed

The natural rate of unemployment is A. the sum of seasonal unemployment and cyclical unemployment. B. the sum of structural unemployment and frictional unemployment. C. the sum of cyclical unemployment and frictional unemployment. D. the sum of structural unemployment and cyclical unemployment.

B. The sum of structural unemployment and frictional unemployment

How do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment​ rate? A. The payments are costly and firms are forced to lay off workers. B. They decrease the opportunity cost of job search. C. They are paid as long as the unemployed person remains unemployed. D. They increase the opportunity cost of job search

B. They decrease the opportunity cost of job search

Indicate whether the following statement is true or false and why. ​"A wage rising slower than the rate of inflation is actually​ falling." A. False. A higher wage increases purchasing power regardless of inflation. B. True. If wages are increasing slower than the average price of goods and​ services, purchasing power falls. C. True. If wages are increasing slower than the average price of goods and​ services, purchasing power increases. D. False. A higher wage decreases purchasing power regardless of inflation

B. True. If wages are increasing slower than the average price of goods and​ services, purchasing power falls.

What is the relationship between the unemployment rate and enacting or increasing a minimum​ wage? When a minimum wage is enacted or increased across a​ country, the unemployment rate A. will decrease because workers will have more money which will increase demand and cause firms to hire more workers. B. will increase some but the impacts will be much larger for some groups of workers. C. is not affected because the minimum wage does not affect firm hiring decisions. D. will increase and the impacts will be spread evenly across all groups of workers.

B. will increase some but the impacts will be much larger for some groups of workers

The BLS uses the establishment survey LOADING... to collect information on employment in the economy. Indicate one drawback of the establishment survey compared to the current population survey and indicate one advantage. A. It includes complete information about unemployment. B. It is based on​ unverifiable, self-reported survey responses. C. It is based on company payroll and not on unverifiable answers. D. It does not include information about​ self-employed people.

C, D

In August​ 2015, which of the following demographic groups had a higher rate of unemployment than the unemployment rate for the total​ population? A. college graduates B. asians C. high school dropouts D. whites

C. high school dropouts

Suppose John Q. Worker is currently unemployed. Each​ day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of​ skills, abilities, and interests. If someone asks John Q. what he does for​ work, he tells them that he is currently​ "in-between jobs." Which of the following best classifies John​ Q.'s unemployment​ status? A. Cyclically unemployed B. Structurally unemployed C. Frictionally unemployed D. Seasonally unemployed

C. Frictionally unemployed

The chapter explains that it is impossible to know whether a particular nominal interest rate is​ "high" or​ "low" because A. it all depends on the federal funds rate. B. it all depends on the​ Fed's monetary policy rule. C. it all depends on the inflation rate. D. it is controlled by the​ Fed's open market operations

C. It all depends on the inflation rate

Which of the following can give an early warning of future increases in the price​ level? A. GDP deflator B. Consumer price index C. Producer price index D. All of the above

C. Producer Price index

When compared to the Great​ Depression, the typical length of unemployment in the modern​ (post-Great Depression-era) U.S. economy is A. significantly longer. B. slightly longer. C. relatively brief. D. approximately the same

C. Relatively Brief

The real interest rate equals A. the nominal interest rate divided by the CPI for a given year. B. the nominal interest rate plus the inflation rate. C. the nominal interest rate minus the inflation rate. D. the inflation rate minus the nominal interest rate.

C. the nominal interest rate minus the inflation rate.

Which of the following is a problem of unanticipated​ inflation? A. Increases in cyclical unemployment B. Redistribution of income from borrowers to lenders C. Increases in taxes paid by investors D. Redistribution of income from lenders to borrowers

D. Redistribution of income from lenders to borrowers

A politician makes the following​ argument: ​"The economy would operate more efficiently if frictional unemployment were eliminated.​ Therefore, a goal of government policy should be to reduce the frictional rate of unemployment to the lowest possible​ level." Eliminating all frictional unemployment A. will be good for the economy since the presence of frictional unemployment increases job destruction. B. will not be good for the economy since the presence of frictional unemployment decreases job creation. C. will be good for the economy because the total unemployment will fall. D. will not be good for the economy since the presence of frictional unemployment increases economic efficiency.

D. will not be good for the economy since the presence of frictional unemployment increases economic efficiency.

If the inflation rate is 6 percent and the nominal interest rate is 4​ percent, then the real interest rate is A. 10​ percent, which is the sum of the nominal interest rate and the inflation rate. B. 2​ percent, which is the inflation rate minus the nominal interest rate. C. 1.5​ percent, which is the ratio of the nominal interest rate to the inflation rate. D. ​-2 percent, which is the nominal interest rate minus the inflation rate

D. -2 percent, which is the nominal interest rate - inflation rate

As of August​ 2015, which of the following demographic groups has the highest unemployment​ rate? A. Asians B. Hispanics C. Whites D. African Americans

D. African Americans

Even perfectly anticipated inflation imposes costs.​ Why? A. Some wages will fail to keep up with anticipated inflation. B. Menu costs. C. Paper money loses its purchasing power by the rate of inflation. D. All of the above. E. A and C only

D. All of the above

The​ "normal" underlying level of unemployment in the economy is A. the sum of structural unemployment and frictional unemployment. B. the natural rate of unemployment. C. the​ full-employment rate of unemployment. D. All of the above.

D. All of the above

When the economy is at full​ employment, A. all remaining unemployment is either frictional or structural. B. the unemployment rate is greater than zero. C. the natural rate of unemployment prevails. D. All of the above

D. All of the above

Which of the following causes changes in the CPI to overstate the true inflation​ rate? A. Increase in quality bias B. Substitution bias C. New product bias D. All of the above

D. All of the above

What effect do labor unions have on the unemployment​ rate? A. By increasing the wage above market​ equilibrium, labor unions considerably increase the unemployment rate. B. By increasing the wage above market​ equilibrium, labor unions considerably decrease the unemployment rate. C. Labor unions can significantly increase the unemployment rate when members go on strike. D. Since few​ non-government workers are​ unionized, there is no significant effect on the unemployment rate

D. Since few​ non-government workers are​ unionized, there is no significant effect on the unemployment rate

What is an example of cyclical​ unemployment?

During a recession, aircraft assemblers are laid off but expect to be recalled as the economy improves.

Why is the unemployment​ rate, as measured by the Bureau of Labor​ Statistics, an imperfect measure of the extent of joblessness in the​ economy? A. It does not account for inaccurate responses to the Current Population Survey. B. It fails to account for illegal activities. C. Discouraged workers are not considered unemployed. D. Underemployed people are considered employed. E. All of the above.

E. All of above

Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new​ job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics​ degree, what is the best classification of her unemployment​ status?

Structurally Unemployed

When the economy is at full​ employment, unemployment is equal to

The natural rate of unemployment

T/F: If inflation is unexpectedly​ high, borrowers will benefit and lenders will be harmed

True