ECON EXAM 3 PRACTICE PROBLEMS

Which economic indicator tells you about the future expected profits of businesses?

S&P 500

Hyperinflation is:

extremely high rates of inflation.

Suppose that an economy is in a recession. You would expect to see the unemployment rate:

rise above the equilibrium unemployment rate

If you see that the consumer price index this year is lower than the consumer price index last year, this means that:

on average, prices went down across the economy.

The GDP deflator is an index that tracks the:

price of all goods and services produced domestically.

The real interest rate is the:

nominal interest rate minus the rate of inflation.

True or false: Only fiat money, as opposed to barter and commodity money, serves all three functions of money (unit of account, medium of exchange, store of value)

false

You are putting together a report of both recent economic activity and predictions for economic growth over the next year. You should not use seasonally adjusted data so that you can get a true picture of the economy.

false

If you see that inflation between last year and this year is 3%, this means that:

on average, prices went up across the economy by 3%.

Aiden recently graduated from college without a job.He hasn't started looking for one yet, but he plans to start searching for a job next month after he has moved back to his family's house and had time to catch up with his friends. Aiden is considered

not in the labor force

What kind of data adjustment removes the effect of sales spikes due to the holiday season?

seasonally adjusted data

If the village of Happyville has 150 residents, of which 50 are children or senior citizens, 95 are working, and 5 are actively seeking work, the unemployment rate is: The unemployment rate is

5%

Based on Okun's rule of thumb, if you forecast that the output gap will decline from 0% to -3%, the unemployment rate will:

rise by 1.5%

The four stages of the business cycle are:

peak, recession, trough, and expansion.

instead of the consumer price index, theFederal Reserve uses the _____, which includes all items in the economy rather than just what consumers pay for

personal consumption expenditure (PCE)deflator

According to Okun's rule of thumb, for every 1% fall in the actual output below potential output, the unemployment rate

rises by 0.5%

If the frictional rate of unemployment is 1.45%, the structural rate of unemployment is 2.3%, and the total unemployment rate is 6%, then we can conclude that:

the natural (long-run equilibrium) rate of unemployment is 3.75%.

An economy's potential output level is:

the output that is possible when all resources are fully employed.

What is Uganda's real GDP if its nominal GDP is $27.5 billion (in current US$), and the GDP deflator is 163.4?

$16.8 billion

In 1995, when the consumer price index was 152.38, women earned a median income of $12,130 per year. If the consumer price index in 2015 was 236.99, how much was $12,130 in 2015 dollars?

$18,865

Suppose a labor market is described by the demand equation, Qd = 60 - 2w, and the supply equation, Qs = -10 + w, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). What is the equilibrium wage in this labor market?

$23.33

If an economy has a positive output gap of 1.5%, this means:

GDP is 1.5% above potential GDP.

If an economy has a positive output gap of 3%, this means

GDP is 3% above potential GDP

Suppose that due to a poor economy, 1 million workers lost their jobs, causing the unemployment rate to increase to 10%. After a few months of searching, 300,000 of these unemployed workers give up looking for work. How would the decision by these 300,000 people affect the unemployment rate, all else equal?

the unemployment rate will decrease

True or false: Fiat money allows for easier transactions in both, physical and electronic forms, than commodity money does

true

An underemployed person is one who is:

working but whose skills are not fully utilized.

Consider the following basket of goods: 50 bottles of milk, 100 avocados, 50 apples, and eight pineapples. Suppose that last year, each bottle of milk was $2.50, each avocado was $1.50, each apple was $0.75, and each pineapple was $4. This year, each bottle of milk is $2.50, each avocado is $1.80, each apple is $0.80, and each pineapple is $4.30. What is the inflation rate between last year and this year?

10.13%

The town of Fincastle has 250 working-age adults, of whom 200 are employed and 25 are unemployed. The labor force participation rate is

90%

Which of the following forms of money would best represent fiat money?

A $20 bill printed in 2015

Which of the following will fall when the economy is expanding?

Applications for unemployment benefits

which of the following shows the medium of exchange function of money?

Daniela goes to the store and purchases roses with U.S. dollars.

Which of the following will probably rise when the economy is in a recession?

Initial unemployment claims

Which of the following correctly describes the business cycle?

It is the fluctuations of GDP around the potential output.

You have four friends. Which of your friends can be described as "cyclically unemployed"?

Keele, who lost her job after her company lost a lot of customers during an economic downturn

Which of the following is a narrow indicator?

The stock price for JPMorgan Chase & Co

Henry Ford's $5 per day wage is an example of:

an efficiency wage.

Money illusion is the

tendency to focus on nominal values instead of inflation-adjusted values

You purchase a certificate of deposit that earns an advertised rate of 1.75% interest per year. What is your real rate of return if the actual inflation rate is 1.9%?

-0.15%

The town of Fincastle has 250 working-age adults, of whom 200 are employed and 25 are unemployed. The unemployment rate is

11%

In May 2019, there were approximately 68,980,000 people in Japan's labor force. About 1,650,000 people were unemployed. What was the unemployment rate?

2.4%

Which of the following correctly shows the steps needed to calculate the inflation rate?

Find out what people typically buy, collect the prices from the stores where people shop, tally up the cost of the basket of goods and services, and calculate the inflation rate.

Louise opened her own Etsy shop while she finishes her final year of college. She has time to commit only five hours per week to the business. Louise is considered

employed

Suppose that an economy is overheating. You would expect to see the unemployment rate:

fall below the equilibrium unemployment rate

Indeed.com improves its algorithms so that job seekers can more easily find jobs that match their skills.This will likely reduce

frictional unemployment

Chelsea was a manager at a vinyl records store who recently quit because she felt the recent popularity of vinyl is a current fad that will eventually fade away. She is now actively looking for a job in the hospitality industry. Chelsea is considered:

frictionally unemployed

Menu costs are the:

marginal costs of adjusting prices.

Which of the following lists the functions of money?

medium of exchange, store of value, and unit of account

In 1971, the cost of a four-year college degree from a public university was about $1,410. The consumer price index was 40.48 in January 1971. If the current consumer price index is 251.1, what is the approximate cost of the four-year degree in current dollars?

$8,746

You purchase a certificate of deposit and expect an inflation rate of 1.25% over the next year. Your nominal rate of interest is 2.1%. What is your expected real rate of return?

0.85%

What is Sri Lanka's GDP deflator if its nominal GDP is $88.9 billion (in current US$) and the real GDP is $59.34 billion?

149.8

Suppose a labor market is described by the demand equation, Qd = 60 - 2w, and the supply equation, Qs = -10 + w, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). If the government institutes a minimum wage of $25, how many workers will be willing to work in this market?

15,000,000

In May 2019, Texas reported a civilian labor force of 14,012,711. The number of employed people was 13,516,387. What was the unemployment rate?

3.5%

Suppose that the CPI in 2013 was 250 and theCPI in 2014 was 260. What is the rate of inflation in this economy?

4.0%

You are a buyer at an auto factory that is facing rising input costs. You manager asks you to determine if your competitors are also experiencing rising input prices. Which measure of prices should you use?

PPI

Netanya owns a consulting business. During a severe downturn in the economy, she has to fire several of her analysts. Netanya's analysts are considered

cyclically unemployed

The Great Moderation refers to the:

decreased volatility of the U.S. economy.

Boris just finished an economics degree and wants to live in Washington, D.C., where there are many job openings matching his skills and education. He moves to D.C.without a job and crashes on a friend's couch while looking for one. Boris is considered

frictionally unemployed

The higher the minimum wage, as compared to the equilibrium wage, the:

higher the structural unemployment rate.

The natural unemployment rate is also known as the _____ unemployment rate.

long-run