Economic Indicators and Challenges

D

A knitting factory worker who loses her job because the company has relocated the plant to another country is an example of _____. (A) Cyclical unemployment (B) Frictional unemployment (C) Seasonal unemployment (D) Structural unemployment

Consumer price index (CPI).

A price index determined by measuring the price of a standard group of goods meant to represent the typical "market basket" of a typical urban consumer:

Workfare.

A program requiring work in exchange for temporary assistance:

A

According to the demand-pull theory, what is responsible for inflation? (A) Demand for goods and services exceeds existing supply. (B) Too much money is in circulation. (C) Producers raise prices to meet increased costs. (D) The economy is in a wage-price spiral.

Inflation.

General increase in prices:

B

Globalization, the development of new technology, changes in consumer demand, and the discovery of new resources are all causes of _____. (A) Cyclical unemployment (B) Structural unemployment (C) Frictional unemployment (D) Seasonal unemployment

Food stamps.

Government-issued coupons that recipients exchange for food:

Census.

Official count of the population:

Poverty rate.

Percentage of people who live in households with income below the official poverty line:

Unemployment rate.

Percentage of the nation's labor force that is unemployed:

Discouraged worker.

Person who wants a job but has given up looking:

Market basket.

Representative collection of goods and services:

Deflation.

Sustained drop in the price level:

D

The Temporary Assistance for Needy Families (TANF) program _____. (A) Provides benefits to a family for ten years. (B) Can only provide jobs for individuals in an enterprise zone. (C) Only provides cash assistance to poor families. (D) Provides work in exchange for temporary assistance.

Lorenz curve.

The curve that illustrates income distribution:

Full employment.

The level of employment reached when there is no cyclical unemployment:

B

The market basket that is used by the Bureau of Labor Statistics to calculate prices is made up of which of the following? (A) Food items only. (B) Typical goods and services for an urban household. (C) Nonfood items only. (D) Food and necessary services for any family.

A

The market basket that is used by the Bureau of Labor Statistics to calculate prices is made up of which of the following? (A) Typical goods and services for an urban household. (B) Food items only. (C) Nonfood items only. (D) Food and necessary services for any family.

Inflation rate.

The percentage rate of change in price level over time:

Wage-price spiral.

The process by which rising wages cause higher prices, and higher prices cause higher wages:

Core inflation rate.

The rate of inflation excluding the effects of food and energy prices:

B

The rate of inflation, excluding the effects of food and energy prices, is _____. (A) Hyperinflation (B) The core inflation rate (C) The price index (D) The wage-price spiral

C

What is not likely to be a major problem for businesses during a period of ongoing inflation? (A) They cannot anticipate their costs. (B) They do not know when the inflation will stop. (C) They have difficulty hiring help. (D) Their money loses its value.

Purchasing power.

Ability to purchase goods and services:

D

According to the cost-push theory, what is responsible for inflation? (A) The economy is operating as though there was a war. (B) Too much money is in circulation. (C) Demand for goods and services exceeds existing supply. (D) Producers raise prices to meet increased costs.

B

All of the following are causes of structural unemployment except _____. (A) Inventing new ways of doing things. (B) Falling of the stock market. (C) Relocating jobs to other countries. (D) Discovering new resources.

Enterprise zone.

Area where companies can locate free of certain local, state, and federal taxes and restrictions:

A

Because of low unemployment rates in the country, employers offer higher wages. To meet their higher payroll costs and maintain profits, they charge consumers more for goods and services. What are the likely consequences? (A) A wage-price spiral of ever-increasing prices. (B) Increasing numbers of people living on a fixed income. (C) Demand-pull inflation. (D) A prolonged period of deflation.

Block grant.

Federal funds given to states in lump sums:

C

For the majority of companies, the most common increase in the cost of production results from rising _____. (A) Energy costs (B) Prices of raw materials (C) Wages (D) Maintenance costs

B

How can changes in technology or consumer demand make it difficult for people to get jobs? (A) By making it possible for some people to work fewer hours. (B) By changing the number or kind of jobs available. (C) By creating a demand for things that are not available. (D) By making it difficult for people to buy what they want.

Programs focus on block grants to states, education, medical benefits, and subsidized housing. Enterprise zones attempt to revitalize inner city areas, while other programs focus on job training.

How do existing government policies deal with poverty?

It reduces the purchasing power of money. For example, a movie ticket that cost 25 cents 50 years ago might cost $9 today. That quarter no longer has the same purchasing power that it had 50 years ago.

How does inflation affect purchasing power?

B

How does the U.S. Census Bureau define a family? (A) A father, mother, and children regardless of where they live. (B) Two or more people related by birth, marriage, or adoption who live in the same housing unit. (C) A group of people who live together and share the expenses of a single housing unit. (D) All people who live in a housing unit regardless of relationship.

B

How has the distribution of income in the United States changed over the last 20 years? (A) It has become more equal. (B) It has become less equal. (C) It has not changed appreciably. (D) It became more equal for about 10 years but has become less equal.

A

How long can a family collect aid from the Temporary Assistance for Needy Families (TANF) program? (A) A maximum of five years. (B) As long as necessary. (C) A maximum of ten years. (D) A maximum of two years.

Income distribution.

How the nation's total income is distributed among its population:

B

If the Lorenz Curve were used to graph the distribution of income in an economy where all households earn the exact same income, the graph would show a _____. (A) Curved line and sloped diagonally upward. (B) Straight line and sloped diagonally upward. (C) Curved line and sloped diagonally downward. (D) Straight line and sloped diagonally downward.

A

If the number of people classified as unemployed is 50,000 and the number of people classified as employed is 250,000, what is the unemployment rate? (A) 16.17 percent (B) 8.7 percent (C) 11.5 percent (D) 8 percent

A

In 2003, the top 20 percent, or wealthiest fifth, of U.S. households earned _____. (B) About the same as the bottom four fifths combined. (B) Less than the bottom four fifths combined. (C) More than the bottom four fifths combined. (D) Less than the bottom three fifths combined.

B

In a certain country, the labor force is 30 million and the unemployment rate is 5 percent. What is the amount of unemployed individuals in this country? (A) 15,000 (B) 1.5 million (C) 15 million (D) 150,000

Poverty threshold.

Income level below which income is insufficient to support families or households:

Fixed income.

Income that does not increase even when prices go up:

Hyperinflation.

Inflation that is out of control; very high inflation:

C

Julia invested $3,000 at an annual interest rate of 5 percent. From last year to this year, there has been a 4 percent inflation rate. After a year, the purchasing power of her investment _____. (A) Is 4 percent (B) Is 5 percent (C) Rose by 1 percent (D) Fell by 1 percent

Price index.

Measurement that shows how the average price of a standard group of goods changes over time:

Demand-pull theory.

Theory that inflation occurs when demand for goods and services exceeds existing supplies:

Cost-push theory.

Theory that inflation occurs when producers raise prices to meet increased costs:

Quantity theory.

Theory that too much money in the economy causes inflation:

A

To determine the unemployment rate, the Bureau of Labor Statistics polls a sample population of _____. (A) 50,000 families (B) 80,000 unemployed individuals (C) 80,000 families (D) 50,000 unemployed individuals

Seasonal unemployment.

Unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season:

Frictional unemployment.

Unemployment that occurs when people take time to find a job:

Structural unemployment.

Unemployment that occurs when workers' skills do not match the jobs that are available:

Cyclical unemployment.

Unemployment that rises during economic downturns and falls when the economy improves:

A

What age group in the United States has the largest percentage of its members living in poverty? (A) Children (B) The middle aged (C) The elderly (D) Young adults

A

What does full employment mean? (A) There is no cyclical unemployment. (B) Those who want to work have full-time jobs. (C) Every person who wants to work has a job. (D) Approximately 80 percent of people have jobs.

D

What does it mean when a person is underemployed? (A) The person is not making as much money as he or she needs (B) The person is looking for work in a special field. (C) The person has been working but now is laid off. (D) The person has a job but is overqualified for it.

B

What does the Lorenz Curve illustrate about the economy? (A) The kinds of jobs. (B) The distribution of income. (C) The causes of poverty. (D) The types of families.

D

What does the unemployment rate represent? (A) The percentage of the total population that is not employed. (B) The total number of people who are unable to find work. (C) The total number of people who are not employed. (D) The percentage of the total labor force that is unemployed.

Underemployed.

Working at a job for which one is overqualified, or working part-time when full-time work is desired:

A

What is the Consumer Price Index (CPI)? (A) An index determined by measuring the price of standard goods bought by urban consumers. (B) A measure of prices of housing and rental costs all over the country. (C) An index of the cost of living for all U.S. consumers. (D) An index of prices of items used by manufacturers and retailers.

A

What is the difference between seasonal unemployment and structural unemployment? (A) Seasonal unemployment is due to changes in production schedules; structural unemployment is because people lack skills. (B) Seasonal unemployment is generally among low-paid workers, while structural unemployment is among the highly paid. (C) Seasonal unemployment is rare in a modern society, while structural unemployment is not. (D) Seasonal unemployment occurs only in the summer, while structural unemployment can occur all year round.

D

What is the poverty threshold? (A) The percentage of people who live in poverty. (B) The income needed to live in an inner city or rural area. (C) The income of the lowest 20 percent of families. (D) The income level below that which is needed to support a family.

C

What is the term for a situation in which a person is overqualified for the job he or she has? (A) Partial employment (B) Discouraged worker (C) Underemployment (D) Low-skilled work

B

What is workfare? (A) A state-by-state grant program of aid to the elderly. (B) A program that requires work in exchange for assistance. (C) Welfare that is limited to preschool-age children. (D) An early poverty program from the 1950s.

D

What typically happens to the inflation rate when unemployment falls to very low levels? (A) It will rise or fall but not with the unemployment rate. (B) It falls. (C) It stays the same. (D) It rises.

A

When Alison, a college math professor, leaves her job at a small rural college and starts looking for a job at a large urban university, she is _____. (A) Frictionally unemployed (B) Structurally unemployed (C) A discouraged worker (D) Cyclically unemployed

Cyclical unemployment occurs during economic downturns.

When does cyclical unemployment take place?

D

Which of the following applies to discouraged workers? (A) They are included in the unemployment rate. (B) They are workers who were injured on the job and can no longer work. (C) They are workers who move to another country to look for work. (D) They are not included in the unemployment rate.

C

Which of the following families is statistically the most likely to live below the poverty threshold? (A) A two-parent family of Hispanic origin living in the inner city. (B) A two-parent white family living in a rural area. (C) A black family headed by a single mother living in the inner city. (D) A black family headed by a single mother living in the suburbs.

A

Which of the following is a result of unemployment that is very low? (A) Companies have difficulties recruiting workers. (B) The few people who are unemployed stop looking for jobs. (C) Wages drop below the level of minimum wage. (D) Companies stop looking for people to fill unfilled jobs.

D

Which of the following is not a relatively recent change in policy concerning welfare? (A) Transitioning from welfare to workfare. (B) Replacing Aid to Families with Dependent Children (AFDC) with Temporary Assistance for Needy Families (TANF). (C) Setting a 5-year limit on TANF benefits. (D) Reassigning the responsibility for implementing antipoverty programs to the federal government.

D

Which of the following is not among the root causes of poverty in the United States? (A) Disabilities (B) Underemployment (C) Size of family (D) Advanced degrees

A

Which of the following might cause the inflation rate to spike up sharply? (A) Prices on world oil markets rise steeply due to war in the Middle East. (B) Plentiful rainfall and moderate temperatures result in good harvests of wheat and soybeans. (C) The purchasing power of the average consumer decreases due to a sluggish economy. (D) The items in the CPI market basket change to account for changing consumer buying habits.

B

Which of the following people is most likely to be classified as "working poor"? (A) Jim, who is a full-time student with a work-study job in the college library. (B) Carol, a single mother who works 35 hours a week at a job that pays slightly above minimum wage. (C) Jason, who is working part time as a construction worker so he can devote time to starting up a real estate business. (D) Dolores, who has an advanced degree and works 40 hours a week.

C

Which of the following statements best describes income distribution in the United States? (A) Most people earn the same income. (B) The richest 20 percent of the population has about 20 percent of the national income. (C) The richest 20 percent of the population has a much greater share of income than the poorest 20 percent. (D) The richest 20 percent of the population has slightly more income than the poorest 20 percent.

D

Which of the following statements refers to the wage-price spiral process? (A) The salary of a worker fluctuates with the amount of sales he or she accomplishes per month. (B) Employees only receive a raise when their purchasing power has been eroded by inflation. (C) An employee loses his or her job, finds a position at another company, and is underemployed. (D) A worker receives a raise, which increases costs for the employer.

B

Which theory says that inflation occurs when the demand for goods exceeds the existing supply? (A) Quantity theory (B) Demand-pull theory (C) Cost-push theory (D) Supply-and-demand theory

C

Who are the "working poor"? (A) Those who suffer from chronic health problems. (B) Those who cannot work because they are disabled. (C) Those who have jobs but do not earn enough. (D) Those who cannot work because they have small children.

A

Who is most likely to be worried about high inflation? (A) A retired couple on a fixed income (B) A shopkeeper (C) A doctor with a suburban practice (D) A factory worker

Even when an economy is working properly, it will experience frictional, seasonal, and structural unemployment.

Why isn't full employment the same as zero unemployment?