Chapter 9 macroeconomics
You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. The CPI over that year rises from 180 to 200. What is the real interest rate you are paying?
-6.1%
You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. The CPI over that year rises from 200 to 210. What is the real interest rate you are paying?
0%
Assume the market basket for the consumer price index has three products Cokes, hamburgers, and CDs with the following values in 2000 and 2006 for price and quantity: The Consumer Price Index for 2000 equals (approximately)
100
Assume the market basket for the consumer price index has three products 34) Cokes, hamburgers, and CDs with the following values in 2000 and 2006 for price and quantity: The Consumer Price Index for 2006 equals (approximately)
121
Between 2007 and 2008, the CPI of a small nation rose from 180 to 185, and household incomes rose by 3% during that period of time. The cost of living in this economy increased by _____ (choose the closest answer), and the purchasing power of household income ______ between 2007 and 2008.
2.8%; rose
In January of 2001, the population of the United States was 276.8 million, the working -age population was 210.2 million, the total number of people ʺemployedʺ and ʺunemployedʺ was 145.0 million, and the total number of unemployed people was 5.5 million. What was the unemployment rate?
3.8 percent
The CPI in 1980 was 82, and the CPI in 2010 was 220. If you earned a salary of $100,000 in 2010, what would be a salary with equivalent purchasing power in 1980? (choose the closest answer)
37,273
If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force?
475 million
If the number of unemployed workers is 50 million, the number in the working-age population is 500 million, and the unemployment rate is 12.5%, what is the labor force participation rate?
80%
If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, what is the labor force participation rate?
95%
Which of the following is an example of a worker experiencing cyclical unemployment?
A Freightliner employee that got laid off because of the recession of 2001
Suppose that 100 people that were officially classified as ʺunemployedʺ quit looking for work in order to go back to school full-time. This change will cause:
a decrease in the unemployment rate and a decrease in the labor force participation rate.
Minimum wage laws cause unemployment because the legal minimum wage is set
above the equilibrium wage, causing the quantity of labor demanded to be less than the quantity of labor supplied.
Minimum wage laws cause unemployment because the legal minimum wage is set
above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied.
If inflation is completely anticipated,
firms lose because they incure menu costs
Establishing a state employment agency that speeds up the process of matching unemployed workers with unfilled jobs is an attempt to lower
frictional unemployment
Rosina Gonzales quit her job in Pennsylvania and moved to California to be close to her family. She is currently looking for work, so she would be considered
frictionally unemployed
The CPI is used as a cost of living index to adjust the incomes of government workers. Given what we know about the biases in the CPI, incomes that are adjusted using the CPI will typically
increase by more than the actual change in the cost of living
Discouraged workers are classified by the BLS as
out of the labor force
Which of the following correctly describes the relationship between the price level and the inflation rate?
positive rates of inflation imply that the price level is rising
Members of the military are currently not included in the employment, labor force, and working-age population statistics. What impact would including members of the military in these statistics have on the unemployment rate and the labor force participation rate?
Including members of the military would reduce the unemployment rate and increase the labor force participation rate.
Which of the following best describes the relationship between the price level and the inflation rate?
The inflation rate is the percentage change in the price level from one period to the next.
The CPI in 1980 was 82, and the CPI in 2006 was 202. If you earned a salary of $30,000 in 1980, what would be a salary with equivalent purchasing power in 2006?
$73,902
Which of the following causes the unemployment rate to overstate the true extent of joblessness?
A drug dealer reports herself as unemployed
Which of the following has a tendency to reduce the unemployment rate?
decreasing unemployment insurance in an economy
Unexpectedly low inflation causes which of the following
Borrowers pay a higher real interest rate than they expected
Which of the following describes the accuracy of the Consumer Price Index?
Changes in the CPI overstate the true rate of inflation.
In class we maintained that the biggest problem with inflation in the long run is that it means that the paychecks of typical people will have less buying power, and thus people become poorer in real terms.
False
Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2000 is the base year, then what is the CPI for 2008?
None of the above
Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing?
Sarah is not experiencing unemployment of any kind because she is not currently part of the labor force.
Between 2007 and 2008, the CPI of a small nation rose from 182 to 185. If household incomes rose by 3% during that period of time, which of the following is true?
The purchasing power of household income rose between 2007 and 2008.
Full employment occurs when
actual unemployment is equal to the natural rate of unemployment
An increase in frictional unemployment will result in
an increase in the unemployment rate
An increase in cyclical unemployment will result in
an increase in the unemployment rate.
If inflation is higher than expected, then lenders will _______________ and borrowers will _______________.
be harmed; benefit
In constructing the CPI, the BLS has to deal with ʺsubstitution biasʺ which is defined the bias in the CPI resulting from
consumersʹ substitution away from goods that become relatively more expensive and toward goods that become relatively cheaper.
People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering
structural unemployment
How would you best describe a manufacturing employee who has been fired because he was replaced by a robot (new technology) and does not have the skills necessary to help operate the robot?
structurally unemployed
Suppose that the prices of dairy products have risen less than prices in general over the last several years. To which problem in the construction of the CPI is this most relevant?
substitution bias
