Econ Test 2

The most commonly cited measure of inflation in the United States is: A. the Consumer Price Index (CPI). B. the Deflationary Price Index (DPI) C. the Cumulative Price Index (CPI) D. the Inflationary Price Index (IPI)

A. the Consumer Price Index (CPI).

If a nation's labor force receives a significant influx of young workers: A. the natural rate of unemployment is likely to increase. B. the natural rate of unemployment is likely to decrease. C. the natural rate of unemployment is unlikely to change D. frictional unemployment will likely decrease to zero.

A. the natural rate of unemployment is likely to increase.

The most significant real economic cost of high unemployment is: A. the potential goods and services that might have been produced but weren't. B. the money cost of retraining persons to obtain new jobs. C. the lost tax revenue that might have been paid by persons if they had worked. D. the money cost of unemployment insurance payments to the unemployed.

A. the potential goods and services that might have been produced but weren't.

Insofar as government public policy is concerned, the best way to battle unemployment would be __________________. A. to minimize recessions B. to maximize unemployment payments C. to maximize unemployment insurance duration D. to minimize labor unions

A. to minimize recessions

Aggregate supply (AS) denotes the relationship between the __________________ that firms choose to produce and sell and the _________________, holding the price of inputs fixed. A. total quantity; price level for output B. type of goods; input price of raw materials C. price of goods; number of employees D. total inputs; types of goods

A. total quantity; price level for output

While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices. A. ongoing decrease B. ongoing rise C. short term rise D. short term decrease

B ongoing rise

Women composed __________ of the paid workforce in 1900 and 50% of the paid workforce in 2010. A. 2% B. 18% C. 33% D. 60%

B. 18%

If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals: A. 32%. B. 25%. C. 20%. D. 8%.

B. 25%

The U.S. unemployment rate moves up and down as the economy moves in and out of recessions. But over time, the unemployment rate seems to return to a range of ____________. A. 2%-4% B. 4%-6% C. 6%-8% D. 8%-10%

B. 4%-6%

If the unemployment rate is 6 percent and the number of persons unemployed is 6 million, then the number of people employed is equal to: A. 100 million. B. 94 million. C. 106 million. D. 6 million.

B. 94 million

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________. A. natural rate of unemployment B. business cycle C. supply curve D. labor supply

B. BUSINESS CYCLE

Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be: A. laid off. B. underemployed. C. out of the labor force. D. unemployed.

D. unemployed.

AS slopes up because

price level for outputs rises

The AD slopes down when

price level rises

Aggregate Demand

refers to the amount of total spending on domestic goods and services in an economy

During the deep recessions of the early 1980s and of 2007-2009, unemployment reached roughly __________. A. 10% B. 20% C. 30% D. 40%

A. 10%

During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force. A. 25% B. 45% C. 65% B. 85%

A. 25%

Freelife, New Hampshire has a labor force of 78,567 persons and employment of 74,382. The unemployment rate for the city is: A. 5.3%. B. 5.6%. C. 6.0%. D. 7.1%

A. 5.3%

In an AD/ASAD/AS diagram, __________________________ could explain a rise in cyclical unemployment? A. a shift to the left in either AS or AD B. a shift in AS to the left C. a shift in AS to the right D. a shift in AD to the left

A. a shift to the left in either AS or AD

In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation. A. cost of living adjustments B. inflation protection plans C. inflation ceiling guarantees D. wage protection clauses

A. cost of living adjustments

The type of unemployment that occurs because of a recession is called: A. cyclical unemployment. B. the natural rate of unemployment. D. seasonal unemployment. C. frictional unemployment.

A. cyclical unemployment.

A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as: A. cyclically unemployed. B. underemployed. C. frictionally unemployed. D. naturally unemployed.

A. cyclically unemployed.

_____________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate. A. Efficiency wage theory B. Equilibrium wage theory C. Employee wage theory D. Employer wage theory

A. efficiency wage theory

A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be: A. frictionally unemployed. B. underemployed. C. cyclically unemployed. D. structurally unemployed.

A. frictionally unemployed

As the aggregate price level in an economy rises, ____________________. A. interest rates increase B. consumer demand increases C.exports decrease D. investment increases

A. interest rates increase

Karen chooses to go to university fulltime rather than to work. Karen: A. is not part of the labor force. B. is part of the labor force and what economists call a discouraged worker. C. is part of the labor force, but not actively seeking work. D. is considered employed.

A. is not part of the labor force

The unemployment rate may underestimate the true extent of unemployment if: A. many part-time employees would like to work fulltime, but are unable to get the additional work. B. employees increase the number of hours they work overtime. C. there are a large number of people working in the underground economy. D. people are pretending to look for work so that they can continue receiving unemployment benefits.

A. many part-time employees would like to work fulltime, but are unable to get the additional work.

A university student who is enrolled in school fulltime and not seeking employment is considered: A. out of the labor force. B. unemployable, and not counted in official statistics. C. employed in leisure. D. underemployed.

A. out of the labor force.

Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered: A. out of the labor force. B. unemployed. C. employed in the underground economy. D. underemployed.

A. out of the labor force.

Two factors that complicate the calculation of the inflation rate are: A. substitution and quality/new product bias B. preferential bias C. complimentary product bias D. consumer behavior bias

A. substitution and quality/new product bias

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is: A. substitution bias B. attribution bias C. complimentary bias D. preference bias

A. substitution bias

Aggregate demand curves slope downwards for each of the following reasons EXCEPT A. The wealth effect: As the price level falls, the buying power of people's savings increases and induces them to spend more. B. The substitution effect: As the price level falls, people buy more of the cheaper goods and less of other goods. C. The interest rate effect: As prices for outputs rise, it costs more to make the same purchases, driving up the demand for money, raising interest rates and reducing investment spending. D. The foreign price effect: As the price level falls, U.S. become more attractive to foreigners and domestic residents, increasing net export spending.

B. The substitution effect: As the price level falls, people buy more of the cheaper goods and less of other goods.

Frictional unemployment occurs when: A. there is friction between an employer and employee. B. a worker decides to quit one job to seek a different job. C. a large corporation transfers a worker to another city. D. college students go back to school at the end of the summer.

B. a worker decides to quit one job to seek a different job.

The labor force consists of: A. discouraged workers, employed workers, plus those actively seeking work. B. all adults who are working or actively seeking work. C. all adults who are able to work. D. all adults who are working, plus those not working

B. all adults who are working or actively seeking work

When the economy of a country is operating close to its full capacity: A. the unemployment rate is greater than the natural rate of unemployment. B. cyclical unemployment is close to zero. C. unemployment is close to zero. D. the unemployment rate is less than the natural rate of unemployment.

B. cyclical unemployment is close to zero.

Another term used to describe negative inflation is: A. counter inflation B. deflation C. hyperinflation D. GDP deflator

B. deflation

The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied. A. efficiency wage B. equilibrium wage C. sticky wage D. natural rate of unemployment

B. equilibrium wage

The maximum quantity that an economy can produce, given its existing levels of labor, physical capital, technology, and institutions, is called: A. real GDP. B. potential GDP. C. aggregate supply. D. aggregate demand.

B. potential GDP.

The __________________ is the nominal interest rate minus the rate of inflation. A. real GDP B. real interest rate C. nominally adjusted D. annualized interest rate

B. real interest rate

Inflation can be calculated in terms of how the overall cost of ___________________ changes over time. A. all goods B. the basket of goods C. all goods and services D. all services

B. the basket of goods

The unemployment rate measures: A. the number of people unemployed divided by the number of people employed. B. unemployed workers as a percentage of the labor force. C. unemployed workers as a percentage of the population age over-sixteen. D. unemployed workers as a percentage of the population.

B. unemployed workers as a percentage of the labor force.

In November 2010 the labor force in Siouxtown, was 14,800. There were 14,483 persons employed. The local unemployment rate: A. was 1.2%. B. was 2.1%. C. was 5.6%. D. was 7.1%.

B. was 2.1%

Through good economic years and bad, many European economies had unemployment rates hovering near _________ since the 1970s. A. 1% B. 5% C. 10% D. 20%

C. 10%

The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals: A. 20.2 %. B. 16.8%. C.14.4%. D. 11%.

C. 14.4%

Each month the Census Bureau carries out the Current Population Survey (CPS) (which has been carried out every month since 1940). A total of __________ households are contacted every month. A. 600 B. 6000 C. 60,000 D. 600,000

C. 60,000

If the unemployment rate is 8 percent, then this means: A. 8 percent of the population is unemployed. B. 8 percent of the population age over sixteen is unemployed. C. 8 percent of the labor force is unemployed. D. the number of unemployed persons equals 8 percent of the employed persons.

C. 8 percent of the labor force is unemployed.

The basket of goods in the Consumer Price Index consists of about _________ products; that is, several hundred specific products in over __________ broad-item categories. A. 200; 800 B. 80,000; 400 C. 80,000; 200 D. 800; 200

C. 80,000; 200

Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract? A. COLA plus 1.6% B. COLA plus 1.9% C. COLA plus 2.4% D. COLA plus 2.2%

C. COLA plus 2.4%

_______________________ happens when the economy is producing at its potential and unemployment is at the natural rate of unemployment. A. The foreign price effect B. Stagflation C. Full employment GDP D. The interest rate effect

C. Full employment GDP

In macroeconomics, _____________________ denotes the relationship between the total quantity of goods and services and the price level for output. A. macroeconomic equilibrium B. aggregate supply (AS) C. aggregate demand (AD) D. potential GDP

C. aggregate demand (AD)

Changes in the price level of the different components of aggregate demand are reflected in the AD/ASAD/AS macroeconomic model by a ________________________. A. flatter top portion of AD curve B. longer distance to equilibrium point C. downward sloping AD curve D. shorter distance to equilibrium point

C. downward sloping AD curve

__________ implies that pressure for price increases reaches across _______________markets, not just one. A. inflation; all B. deflation; most C. inflation; most D. deflation; all

C. inflation; most

The unemployment rate may underestimate the true extent of unemployment if: A. many people have a part time as well as a full time job. B. there are a large number of people working in the underground economy. C. many people become discouraged and cease looking for work. D. employees increase the number of hours they work overtime.

C. many people become discouraged and cease looking for work.

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices. A. stabilize B. understate C. overstate D. reduce

C. overstate

When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00. He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders' gym membership? A. 8.6% B. 5.4% C. 7.87% D. 16.66%

D. 16.66%

If the price index moves from 107 to 110, the rate of inflation is: A. 3% B. 30% C. 28% D. 2.8%

D. 2.8%

When an economy's output increases and the price level decreases, the _________ curve has shifted to the ____________. A. AS; left B. AD; left C. AD; right D. AS; right

D. AS; right

Dr. Michaël Bonnal is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it? A. Consumer Price Index B. GDP Price Index C. Consumer GDP D. GDP Deflator

D. GDP Deflator

The effects of inflation are seen in: A. goods and services only B. wages and income levels only C. services and wages only D. goods, services, wages and income levels

D. goods, services, wages and income levels

If the price level of what firms produce is rising across an economy, but the costs of production are constant, then: A. the maximum potential GDP will be exceeded. B. increase in quantity produced won't be large. C. a majority of industries will start running into limits. D. higher profits will induce expanded production

D. higher profits will induce expanded production

In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________. A. perpetual inflation B. ultra inflation C. hypo inflation D. hyperinflation

D. hyperinflation

As the aggregate price level in an economy decreases, A. investment decreases. B. consumer demand decreases. C. interest rates decrease. D. imports decrease.

D. imports decrease.

Why is productivity growth considered to be the most important factor in the AD/ASAD/AS model? A. it shifts the AD curve in the long-term B. it shifts the AD curve in the short-term C. it shifts the AS curve in the short-term D. it shifts the AS curve in the long-term

D. it shifts the AS curve in the long-term

The term "full employment GDP" is synonymous with which of the following? A. aggregate GDP B. Keynesian zone C. macroeconomic equilibrium D. potential GDP

D. potential GDP

Frictional unemployment is: A. unemployment that is due to the friction of competing ideological systems. B. unemployment caused by lack of training and education. C. unemployment caused by automation in the workplace. D. unemployment that is due to normal turnover in the labor market.

D. unemployment that is due to normal turnover in the labor market.

Aggregate Supply

the total amount of goods and services in the economy available at all possible price levels