ECON REVIEW #9
The real average hourly earnings for 1965 in 1982-1984 dollars equal...
$8.28
Suppose your grandfather and a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2018, Then the value of your grandfather salary in 2018 dollars is approximately...
$84,775
The labor force participation rate for the simple economy equals...
(1,100/15,000) x 100
The unemployment rate for this simple economy equals...
(100/1,100) x 100
The labor force participation rate equals the...
(Labor force divided by working-age population) x 100
If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate is...
-3%
Assume the average annual CPI values for 2017 and 2018 with 207.3 and 215.3, respectively. What was the percent increase in the CPI between these two years?
3.86
The inflation rate for 2018 was equal to...
3.9 percent
If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is...
5%
Imagine that you borrow $5000 for one year and at the end of the year you repay the $5000 plus $600 of interest. If the inflation rate was 4%, what was the real interest rate you paid?
8 percent
If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is...
80%
Which of the following policies would reduce structural unemployment?
A job retraining program
Structural unemployment is the result of...
A persistent mismatch between the skills and characteristics of workers and the requirements of the job
Which of the following describes a situation in which the person is hurt by inflation?
A person paid a fixed income during an inflationary period
Cyclical unemployment is the result of...
A slowdown in the economy
Minimum wage laws cause unemployment because the legal minimum wage is set...
Above the market wage, causing labor demand to be less than labor supply
Which of the following would reduce the labor force participation rate, all else equal?
An increase in the working-age population
Which of the following would increase the unemployment rate?
An increase in unemployment insurance payments
Which of the following is the smallest portion of the market basket of goods that makes up the CPI?
Apparel
The consumer price index is the...
Average of the prices of the goods and services purchased by a typical urban family of four
What does the PPI measure?
Average of the prices received by producers of goods and services at all stages of the production process
When actual inflation is less than expected, inflation...
Borrowers lose and lenders gain
The most widely used measure of inflation is based on which of the following price indices?
Consumer price index
Which of the following price indices comes closest to measuring the cost-of-living of the typical household?
Consumer price index
The CPI is also referred to as...
Cost of living index
Most of the unemployment that occurred during the Great Depression was...
Cyclical unemployment
Workers laid off as a result of a recession suffer...
Cyclical unemployment
If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are...
Cyclically unemployed
Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated?
Firms have to hire an extra worker to change prices in its store because of inflation
If inflation is completely anticipated...
Firms lose because they incur menu costs
Efficiency wages cause unemployment because...
Firms pay wages that are above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied
If inflation increases unexpectedly, then
Lenders receive a lower real interest rate than they expected
If firms pay what are called "efficiency wages," they pay wages that...
Motivate workers to increase their productivity
The "new product bias" in the consumer price index refers to the idea that...
New products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers
The economy has gone into a recession. You have majored in computer science and, because of the recession, have difficulty in finding a job. According to the information in the chapter, should you go back to school and get a second major?
No, the recession will most likely be short-lived and I can get a job after it is over
By offering training to workers his friends leave them off because of competition from foreign films, the federal government is attempting to reduce...
Structural unemployment
People who lost their jobs as hand down animators because of the popularity of computer generated 3-D animation are examples of a person who is suffering...
Structural unemployment
The advice to "retrain" would be most appropriate for which of the following types of unemployment?
Structural unemployment
Unemployment arising from a persistent mismatch between the skills and characteristics of workers in the requirements of jobs is called...
Structural unemployment
What are the three main types of unemployment?
Structural, frictional, cyclical
The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect...
That stock prices are more likely to fall
What is outlet bias?
The tendency for households to spend their money at discount stores as prices rise
Currently, the base year for the CPI is the average of prices in the years 1982 to 1984.
True
Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?
Unemployed persons falsely report themselves to be actively looking for a job
To reduce the bias in the consumer price index, the Bureau of labor statistics...
Updates the market basket every two years, rather than every 10 years
The consumer price index implicitly assumes that the demand curve for each group in service in the representative market basket is...
Vertical
If an economy experiences deflation, the real interest rate...
Will be greater than the nominal interest rate
Assume the market basket for the consumer price index has two products-bread and milk-with the following values in 2013 and 2018 for price and quantity: The consumer price index for 2018 equals...
116
Suppose an economy has only three kids in a typical family purchases the amounts given in the table above. If 2013 is the base year, then what is the CPI for 2018?
208
If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest?
3.5%
Labor unions cause unemployment because the union contract wage is set...
Above the market wage, causing a surplus of labor
If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would...
Decrease
If the BLS counted persons that are on active military service in the totals for employment, the labor force, and the working-age population, this would...
Decrease the measured unemployment rate
Since 1948, the labor force participation rate for adult men has ..........and for adult women has..........
Decreased; increased
Which of the following causes the unemployment rate to understate the true extent of joblessness?
Discouraged workers are not counted as unemployed
The real wage equals the nominal wage..........the CPI, all times 100.
Divided by
Which of the following statements is true about the US economy?
Each year, many new jobs are created and many existing jobs are destroyed
The Bureau of Labor Statistics would categorize a person as..........if they were temporarily away from their job because they were ill
Employed
The labor force equals the number of people....
Employed plus unemployed
The natural rate of unemployment is the amount of unemployment...
Equal to frictional plus structural unemployment
Which of the following explains why many European countries have an employment rates that are higher than in the United States?
European countries offer higher unemployment benefits than the United States
The natural rate of unemployment is made up of...
Frictional and structural unemployment
Establishing a state employment agency that speeds up the process of matching unemployed workers with unfilled jobs is an attempt to lower...
Frictional unemployment
The short term unemployment arising from the process of matching workers with jobs is called...
Frictional unemployment
The broadest measure of the price level that includes all final goods and services is...
GDP deflator
Which of the following would decrease the unemployment rate?
Government aid to retrain unemployed workers
Which of the following has a tendency to raise the unemployment rate?
Implementing a minimum wage above the market wage in an economy
Which of the following is not a cost imposed by inflation?
Inflation reduces the affordability of goods and services to the average consumer
The cost to firms of changing prices...
Is called a menu cost
An efficiency wage...
Is higher than the market wage and tends to increase productivity
Which of the following is true about the consumer price index?
It assumes that consumers purchase the same amount of each product in the market basket each month
The unemployment rate equals the number of unemployed divided by the.........., all times 100
Labor force
Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?
Labor force participation rate
The stated interest rate on a loan is the...
Nominal interest rate
A full-time student who is not working is categorized as...
Not in the labor force
Most economists believe that the biases in the consumer price index caused the CPI to overstate the true inflation rate by about...
One half to one percentage point
The Bureau of Labor Statistics would categorize a retiree who is not working as...
Out of the labor force
Full employment is not considered to be zero employment, because...
People do not find jobs instantaneously
The nominal interest rate equals the real interest rate.........the inflation rate.
Plus
If the CPI changes from 125 to 120 between 2017 and 2018, how did prices change between 2017 and 2018?
Prices decreased by 4%
The PPI is the...
Producer price index
The producer price index measures the prices that firms...
Receive for the goods and services they use at all stages of production
When prices are rising, which of the following will be true?
The real interest rate will be lower than the nominal interest rate
If cyclical unemployment is eliminated in the economy, then...
The economy is considered to be at full employment
If the federal government implement program so that the unemployed or more quickly matched with jobs, then...
The natural rate of unemployment will decrease
During a deflationary period...
The nominal interest rate is less than the real interest rate
The unemployment rate is...
The percentage of the labor force that is unemployed
The labor force participation rate is defined as...
The percentage of the working-age population in the labor force
The average price of goods and services in the economy is also known as...
The price level
Frictional unemployment is the result of...
The process of matching workers with jobs
The nominal interest rate will be less than the real interest rate when...
The rate of inflation is negative
When deflation occurs...
The real interest rate is greater than the nominal interest rate
Suppose that the labor movement has a revival in the United States and the majority of workers join labor unions. As a result we would expect...
The unemployment rate to rise
When an economy is at its natural rate of unemployment, which of the following will be true?
The unemployment rate will be greater than 0%
Deflation occurs when...
There is a decline in the price level
The equilibrium wage in a local labor market is $10 per hour. If a minimum wage of $15 per hour is imposed, which of the following will occur?
There will be an increase in unemployment
If inflation is positive and it is perfectly anticipated...
Those that hold paper money lose
