EXAM 2 ECON102 CH. 5

35) If the CPI at the end of last year was 100 and the CPI at the end of this year was 115, the inflation rate was A) 15 percent. B) 115 percent. C) 100 percent. D) 1.5 percent.

A) 15 percent.

7) From September 2013 to September 2014, the employment-to-population ratio increased from 58.6 percent to 59.0 percent. This change could have been the result of A) a decrease in the working-age population. B) unemployed workers becoming marginally attached workers. C) discouraged workers starting to look for jobs again. D) unemployed workers becoming discouraged workers.

A) a decrease in the working-age population.

24) Structural unemployment is A) associated with the general decline of specific industries. B) almost always short-term in nature. C) associated with the normal changing of jobs in a dynamic economy. D) associated with the general downturns in the economy.

A) associated with the general decline of specific industries.

18) Cyclical unemployment ________. A) decreases during an expansion B) decreases during a recession C) grows at the same rate as potential GDP D) is zero at a business-cycle trough

A) decreases during an expansion

16) The percentage of people employed aged 16 years and older divided by the working-age population is known as the.. A) employment-to-population ratio. B) working-age population ratio. C) labor force participation rate. D) employment rate.

A) employment-to-population ratio.

47) If the inflation rate is negative, the price level in an economy is A) falling. B) constant. C) rising rapidly. D) rising slowly.

A) falling.

25) When a person reenters the labor force and looks for a job after spending time at home raising a child A) frictional unemployment increases. B) frictional and cyclical unemployment increase. C) cyclical unemployment increases. D) structural unemployment decreases.

A) frictional unemployment increases.

20) Frictional unemployment A) is unemployment associated with normal labor turnover. B) is unemployment associated with declining industries. C) is voluntary part-time unemployment. D) includes discouraged workers.

A) is unemployment associated with normal labor turnover

48) The biases in the CPI include the A) new goods, quality change, and substitution biases. B) substitution, new goods, and old goods biases. C) old goods, new goods, and quality change biases. D) old goods, unemployment, and inflation biases.

A) new goods, quality change, and substitution biases.

21) The natural unemployment rate A) rises with an increase in structural unemployment. B) rises with a decrease in frictional unemployment. C) rises with an increase in cyclical unemployment. D) falls with an increase in cyclical unemployment.

A) rises with an increase in structural unemployment.

32) In the 1990s, video recordings were made primarily on tapes. However, in the 2000s DVDs became increasingly popular, leading to a sharp decline in video tapes. As a result, many people who manufactured tapes lost their jobs and didn't have the skills necessary to work making DVDs. This occurrence is best consider an example of A) structural unemployment. B) underemployment. C) frictional unemployment. D) cyclical unemployment.

A) structural unemployment.

33) Cyclical unemployment is the result of A) the business cycle. B) technological change or foreign competition. C) normal labor market turnover. D) irresponsible workers with poor work habits.

A) the business cycle.

31) When cyclical unemployment increases and other things remain the same, ________. A) the natural unemployment rate does not change B) the natural unemployment rate increases C) the amount of structural unemployment decreases D) the amount of frictional unemployment increases

A) the natural unemployment rate does not change

36) Assume the inflation rate falls from 4percent to 2 percent. This means that A) the price level is increasing more slowly. B) real GDP is decreasing. C) the price level has fallen. D) the economy is experiencing deflation.

A) the price level is increasing more slowly.

46) At the end of last year, the CPI equaled 120. At the end of this year, the CPI equals 132. What is the inflation rate over this year? A) 12 percent B) 10 percent C) 6 percent D) None of the above answers are correct because more information is needed to calculate the inflation rate.

B) 10 percent

11) If the working-age population is 300 million, with 70 million under the age of 16 and institutionalized, another 70 million not in the labor force, 10 million unemployed and 150 million employed, the employment-to-population ratio is A) 93.8 percent. B) 50 percent. C) 53 percent. D) 65.2percent.

B) 50 percent.

13) In an economy, 23 million people are employed and 2 million are unemployed, but 5 million part-time workers would prefer full-time work. What is the unemployment rate? A) 25 percent B) 8 percent C) 23.2 percent D) 6.7 percent

B) 8 percent

27) The type of unemployment created by the normal rate of reentry and entry into the labor force is A) structural unemployment. B) frictional unemployment. C) cyclical unemployment. D) seasonal unemployment.

B) frictional unemployment.

29) Because of a bank merger, Ms. Davis lost her position as Vice President and had to seek work with other banks. Ms. Davis has the skills necessary to find a new job, thus she is best considered as A) naturally unemployed. B) frictionally unemployed. C) cyclically unemployed. D) structurally unemployed.

B) frictionally unemployed.

12) In September 2014, 32 percent of unemployed workers had been unemployed for 6 months or more. This long-term unemployment is of particular concern because.. A) the labor force participation rate no longer includes these workers in the measurement since they are long-term unemployed. B) long-term unemployment is the most costly type of unemployment. C) the employment-to-population ratio no longer includes these workers in the measurement since they are long-term unemployed. D) the U-3 unemployment rate no longer includes these workers in the measurement since they are long-term unemployed.

B) long-term unemployment is the most costly type of unemployment.

22) Suppose the economy is experiencing frictional unemployment of 1 percent, structural unemployment of 3 percent and cyclical unemployment of 4 percent. What is the natural unemployment rate? A) 5 percent B) 7 percent C) 4 percent D) 3 percent

C) 4 percent

50) Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation rate between these years? A) 5.1 percent B) 6.7 percent C) 5.4 percent D) 30.7 percent

C) 5.4 percent

10) If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the unemployment rate is A) 7.1 percent. B) 6.6 percent. C) 9.1 percent. D) 10 percent.

C) 9.1 percent.

2) Discouraged workers ________ counted as officially unemployed because they ________. A) are not; are not qualified to work B) are; are not working C) are not; are not actively seeking work D) are; are still in the labor force

C) are not; are not actively seeking work

43) The cost of inflation to society includes I.the opportunity costs of resources used by people to protect themselves against inflation. II.the diversion of productive resources to forecasting inflation. A) I only B) II only C) both I and II D) neither I nor II

C) both I and II

26) The unemployment rate is at the natural unemployment rate when A) structural unemployment equals zero. B) frictional unemployment equals zero. C) cyclical unemployment equals zero. D) all types of unemployment equal zero.

C) cyclical unemployment equals zero.

34) When a worker quits a job to look for a better job A) structural and cyclical unemployment increase. B) structural unemployment decreases. C) frictional unemployment increases. D) cyclical unemployment increases.

C) frictional unemployment increases.

39) Suppose that the price level was 100 in 2011, 110 in 2012, and 130 in 2013. Over these three years A) deflation occurred at an accelerating rate. B) prices were stable. C) the inflation rate was positive and accelerating. D) the inflation rate was positive but slowing.

C) the inflation rate was positive and accelerating.

45) The Consumer Price Index is a measure of the average of the prices paid by ________ for a fixed basket of consumer goods and services. A) all consumers B) consumers living in cities with a population greater than 100,000 C) urban consumers D) urban wage earners and clerical workers

C) urban consumers

49) If the basket of goods and services used to calculate the CPI cost $200 in the reference base period and $450 in a later year, the CPI for the latter year equals A) 200. B) 450. C) 325. D) 225.

D) 225.

17) Which of the following decreases the official U-3 unemployment rate? A) More women enter the labor force and seek jobs. B) Workers leave the labor force. C) Young people graduate from college and start to look for their first full-time job. D) None of the above because they all increase or do not change the unemployment rate.

D) None of the above because they all increase or do not change the unemployment rate.

4) Between September 2013 and September 2014 the number of discouraged workers decreased from 852,000 to 698,000. Assuming the change resulted from discouraged workers starting to make specific efforts to find a job again, this change creates A) a decrease to the U-3 unemployment rate. B) a decrease in the labor force participation rate. C) no change to the U-3 unemployment rate. D) an increase to the U-3 unemployment rate.

D) an increase to the U-3 unemployment rate.

19) When the economy is operating at full employment, the natural unemployment rate consists of only.. A) structural and cyclical unemployment. B) frictional and cyclical unemployment. C) cyclical unemployment. D) frictional and structural unemployment.

D) frictional and structural unemployment.

15) Which of the following is NOT included in the working-age population? A) retirees under the age of 55 B) people waiting to be called back to a job after being laid off C) discouraged workers D) people in prison

D) people in prison

30) Structural unemployment is the result of A) normal labor market turnover. B) a slowdown in the rate of economic expansion. C) irresponsible workers with poor work habits. D) technological change or foreign competition.

D) technological change or foreign competition.

23) An individual is structurally unemployed if A) the individual wants to work just during certain months of the year. B) there is a recession and the individual is laid off. C) the individual quits a job in order to search for a better one. D) the individual lacks marketable job skills because technology has changed.

D) the individual lacks marketable job skills because technology has changed.