Homework #3

If the CPI this year is 220 and was 200 in last year, the annual inflation rate between the two years is A. 5 percent. B. 10 percent. C. 20 percent. D. 2 percent.

10 percent

Based on the following data for the country of Tiny Town, the unemployment rate equals Population = 100 Labor force = 80 Number of employed persons = 70 Number of discouraged workers = 5 A. 10/100 × 100. B. 10/80 × 100. C. 15/80 × 100. D. 5/70 × 100.

10/80 x 100

In an economy, 42 million people are in the labor force, 38 million are employed, and 47 million are of working age. How many people are not in the labor force? A. 9 million B. 5 million C. 4 million D. 19 percent;

5 million

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

unpredictable changes in the value of money

The bias in the CPI typically A. cannot be measured or estimated. B. overstates inflation. C. about half the time overstates and about half the time understates the inflation rate. D. understates inflation.

overstates inflation

Labor growth depends mainly on ________ and labor productivity growth depends mainly on_________. A. population growth; increases in real GDP B. population growth; technological advances C. growth in real GDP per person; technological advances D. growth in real GDP per person; growth rate of capital

population growth; technological advances

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

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

The aggregate production function shows how ________ varies with ________. A. leisure time; labor B. real GDP; labor C. labor; capital D. labor; leisure time

real GDP; Labor

People base their labor supply on the ________ because they care about ________. . A. real wage; what their earnings will buy B. money wage; a surplus of labor C. real wage; the equality of money wages and the price level D. money wage; the amount of labor firms demand

real wage; what their earnings will buy

The unemployment rate will never equal zero percent because A.there are some people who do not want to work. B. cyclical unemployment will always exist. C. there will always be discouraged workers. D. some portion of the labor force will always be between jobs.

some portion of the labor force will always be between jobs

If new capital increases labor productivity, the supply of labor ________ and the demand for labor ________. A. Increases; decreases B. increases; increases C. decreases; stays the same D. stays the same; increases

stays the same; increases

An economy is at full employment when ________. A. the unemployment rate is zero B. there is no frictional unemployment C. the unemployment rate equals the natural unemployment rate D. there is no structural unemployment

the unemployment rate equals the natural unemployment rate

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

A. employed, unemployed, or not in the labor force.

Which of the following means that the CPI overstates the actual inflation rate? A. outlet substitution bias B. All of these cause the CPI to overstate inflation. C. new goods bias D. quality change bias

All of these cause the CPI to overstate inflation: Outlet Substitution Bias Quality Change Bias New Goods Bias

Bill is a high-school dropout who lost his job in a fast food restaurant when the economy plunged into a recession. After 8 months, Bill is still looking for work. He is an example of A. structural unemployment. B. frictional unemployment. C. cyclical unemployment. D. the natural unemployment rate.

Cyclical unemployment

An advance in technology shifts the production function upward and shifts the labor A. demand curve rightward. B. demand curve leftward. C. supply curve leftward. D. supply curve rightward.

Demand curve rightward

A recent accounting graduate from a major business school is searching for a place to begin his career as an accountant. This individual is best considered as A. seasonally unemployed. B. frictionally unemployed. C. cyclically unemployed. D. structurally unemployed.

Frictionally Unemployed

Real GDP grows when I. the quantities of the factors of production grow. II. persistent advances in technology make factors of production increasingly productive. III. human capital grows. A. only I B. both I and III C. only II D. I, II, and II

I, II, III

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. both I and II C. II only D. neither I nor II

II only

A decrease in population shifts the A. labor demand curve leftward. B. labor supply curve leftward. C. labor demand curve rightward. D. labor supply curve rightward.

Labor supply curve leftward

Which of the following statements is CORRECT? A. When the real wage increases, the labor supply curve shifts rightward. B. When the real wage decreases, the labor supply curve shifts leftward. C. None of these statements are correct. D. When the real wage increases, the labor supply curve shifts leftward.

None of these statements are correct

Suppose that over a period of years the country of Quasiland switched from being an agriculturally-based economy to a technologically-based economy. As a result, many people lost jobs because they lacked the correct skills. As they search for new jobs, these people are part of A. frictional unemployment. B. cyclical unemployment. C. discouraged workers. D. structural unemployment.

Structural Unemployment

Classical growth theory proposes that real GDP growth is ________ and that real GDP per person will ________ the subsistence level. A. temporary; temporarily be above B. permanent; always be above C. temporary; be above and below D. permanent; temporarily be above

Temporary; Temporarily be above

When an individual who has not been working but has been looking for work decides to terminate the search process, the official unemployment rate A. will fall. B. will rise. C. will remain unchanged. D. may fall or rise depending on whether or not the individual resumes his education.

Will fall