Econ Chapter 8

6. The unemployment rate can understate the true level of unemployment because it does NOT count: a. discouraged workers. b. marginally attached workers. c. the underemployed. d. discouraged workers, marginally attached workers, and the underemployed.

d. discouraged workers, marginally attached workers, and the underemployed.

7. Increases in the unemployment rate typically indicate: a. that workers are more confident about finding new jobs. b. that aggregate disposable income is increasing. c. periods of economic expansion. d. periods of economic recession.

d. periods of economic recession.

20. If a country replaced its currency with a new currency at a ratio of 10 units of the old currency equal to 1 unit of the new currency, real: a. wages would increase. b. incomes would increase even though real wages did not change. c. wages would decrease. d. wages and real income would not change.

d. wages and real income would not change.

18. Which of the following statements is TRUE? a. Borrowers gain at the expense of lenders if the actual inflation rate is higher than expected. b. Borrowers gain at the expense of lenders if the actual inflation rate is lower than expected. c. High inflation rates are more predictable than low inflation rates. d. Only lenders worry about unexpected deflation.

a. Borrowers gain at the expense of lenders if the actual inflation rate is higher than expected.

9. Unemployment associated with the time workers spend in job search is called: a. frictional unemployment. b. structural unemployment. c. cyclical unemployment. d. natural unemployment.

a. frictional unemployment.

15. Actual unemployment is equal to: a. natural unemployment + cyclical unemployment. b. natural unemployment - cyclical unemployment. c. frictional unemployment + structural unemployment. d. natural unemployment - frictional unemployment.

a. natural unemployment + cyclical unemployment.

2. A country's labor force is: a. the sum of employment and unemployment. b. the same as the population age 16 and older. c. only those workers who are employed. d. equal to its population minus the number of people who are unemployed.

a. the sum of employment and unemployment.

8. Which of the following statements is TRUE? a. Economic expansions are always periods of falling unemployment. b. There is a generally strong negative relationship between growth in the economy and the rate of unemployment. c. Unemployment only rises during recessions. d. There is a generally strong positive relationship between growth in the economy and the rate of unemployment.

b. There is a generally strong negative relationship between growth in the economy and the rate of unemployment.

16. The increased costs of transactions that are caused by inflation are known as: a. menu costs. b. shoe-leather costs. c. unit-of-account costs. d. both shoe-leather costs and unit-of-account costs.

b. shoe-leather costs.

10. Unemployment that results when there are more people seeking jobs in a labor market than there are jobs available at the current wage rate is called: a. frictional unemployment. b. structural unemployment. c. cyclical unemployment. d. natural unemployment.

b. structural unemployment.

11. A binding minimum wage is likely to cause: a. frictional unemployment. b. structural unemployment. c. cyclical unemployment. d. natural unemployment.

b. structural unemplyment

4. To the extent that discouraged workers are present in the economy, the reported: a. unemployment rate will overstate the number of people who are unable to find jobs. b. unemployment rate will understate the number of people who are unable to find jobs. c. inflation rate will overstate the true increase in the cost of living. d. inflation rate will understate the true increase in the cost of living.

b. unemployment rate will understate the number of people who are unable to find jobs.

14. The natural rate of unemployment: a. does not change. b. will rise if there is an increase in the number of young workers. c. falls as labor unions become stronger. d. cannot be changed by government policies.

b. will rise if there is an increase in the number of young workers.

3. Which of the following statements is NOT true? a. The unemployment rate can overstate the true level of unemployment. b. The unemployment rate can understate the true level of unemployment. c. The unemployment rate is a literal measure of the percentage of people who want a job but can't find one. d. When the unemployment rate is low, nearly everyone who wants a job can find one.

c. The unemployment rate is a literal measure of the percentage of people who want a job but can't find one.

12. Structural unemployment would NOT be caused by: a. labor unions. b. efficiency wages. c. a minimum wage set below the equilibrium wage. d. public policy.

c. a minimum wage set below the equilibrium wage.

13. The natural rate of unemployment arises from the effects of: a. frictional unemployment only. b. structural unemployment only. c. frictional and structural unemployment. d. frictional, structural, and cyclical unemployment .

c. frictional and structural unemployment.

19. If lenders expect higher inflation in years to come, they will MOST likely: a. increase the real rate of interest. b. decrease the real rate of interest. c. increase the nominal rate of interest. d. decrease the nominal rate of interest.

c. increase the nominal rate of interest.

1. A comparatively high unemployment rate indicates: a. an economic expansion. b. that it is relatively easy to find a job. c. that it is relatively difficult to find a job. d. that employers are having a difficult time finding the right workers.

c. that it is relatively difficult to find a job.

5. Workers who would like to find a full-time job but who are currently working part time are called: a. discouraged workers. b. marginally attached workers. c. the underemployed. d. structurally unemployed.

c. the underemployed.

17. The increased costs that arise because inflation makes money a less reliable unit of measurement are known as: a. menu costs. b. shoe-leather costs. c. unit-of-account costs. d. both shoe-leather costs and unit-of-account costs.

c. unit-of-account costs.