MacroEconomics Chapter Quiz5
If the print media is taken over by the electronic media, thereby causing employees in the print media industry to be permanently laid off, ________ unemployment would increase.
structural
After the success of the Apollo space program, in the mid-1970s NASA budget cuts results in a decrease in the number of jobs for aerospace engineers. This was an example of ________.
structural unemployment.
Of the following inflation rates, which is most likely to affect consumer behavior?
17%
In 2005 the price index was calculated at 115.3 with 2000 as the base year. In 2006 the price index increased to 119.5. What was the inflation from 2005-2006?
3.6%
Which of the following BEST describes the effect inflation has on purchasing power in the United States over the past several decades?
$100 today has the same purchasing power as $15 in 1972
Given the table above, what is the price index for 2013, with 2012 as the base year having a price index of 100 (round your answer to the nearest whole number). Items Quantity in Basket 2012 Price 2013 Price Cake3$12.00$13.00 Pie4$8.00$10.00 Cupcake10$2.00$2.50
118
Calculate the unemployment rate based on the following data for a country: Population: 200, Employed workers: 140, Labor Force: 160, Discouraged workers: 10
12.5%
The number of people employed in one country is 230 million, with a total number of unemployed people at 40 million. The total population for the country is 500 million. What is the unemployment rate?14.8%
14.8%
The Department of Economic Health in the country of Cavia has calculated the price index for a basket of goods from 2014 to 2018. January 2014 is the standardized price index (at 100) for a basket of consumer goods. The price index increased in 2015 to 105.7, in 2016 to 108.6, in 2017 to 115.9, and in 2018 it increased to 120.4. What are the inflation rates in Cavia for 2015, 2016, 2017, and 2018?
2015: 5.7%; 2016: 2.7%; 2017: 6.7%; 2018: 3.9%
If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals ________.
25%
There is a small fictitious island country, called Noil, floating in the south Pacific ocean. Many years ago there was an abundance of fish and the population grew rapidly. Now the adult population has reached a total of 35 thousand people. This year fishing and other jobs have been on the decline and now 1 thousand people are looking to find work. With an increasing elderly population 3 thousand are now retired. Noil does not have an army, but it does have a small coast guard of 432 citizens serving the country and patrolling the waters where needed. What is the country of Noil's unemployment rate?
3.2%
While the U.S. unemployment rate fluctuates over time, it normally returns to a long-run average somewhere between
4% and 6%.
In the far off kingdom of Viracien there is a healthy sized population of citizens over 16 years old. The last census indicated a total adult population of 5 million people. This year a recession hit and 237 thousand people were let go from their jobs and are on the hunt to find new work. Because of the recession many took early retirement and there is now a population of 1.3 million who are not working or looking for various reasons. Because of the unrest, the military of Viracein has increased its ranks and is now grown to a total of 50 thousand citizens serving the country. If Viracein uses the same calculation to find the unemployment rate, what is the country's unemployment rate?
6.5%
With the introduction of robotics to automotive manufacturing, there have been sweeping changes to the automotive assembly line, management and operations at plants. As an example, in a truck manufacturing plant, identify who would most likely be impacted by this technology change and suffer long term structural unemployment?
An assembly line worker with 10 years of screwing together truck panels and a high school diploma
In the country of Cardonia, the natural rate of unemployment is 3.5% according to the Ministry of Economics. Last year there was an economic slow down where the actual rate of unemployment increased to 4.5%. Assuming that the unemployment percentages are accurate for Cardonia, what is the likely outcome for the economy of Cardonia?
Cardonia's economy will grow until real GDP is equal to potential real GDP and the unemployment rate equals 3.5%
A contraction in the business cycle is likely to result in which form of unemployment increasing?
Cyclical
Why are certain policy decisions (like those undertaken by the Federal Reserve) best informed by using the core inflation index as opposed to the CPI?
Fluctuations in food and energy prices can be transitory
Henry has accepted a new position in the Federal government after working at ball bearing manufacturing plant. He has been put to the task to measure the economic growth as accurately as possible for the nation's last year. What would Henry use in this instance to produce the most accurate growth analysis?
GDP Deflator
Cross-country comparisons of unemployment rates are difficult for all the following reasons except:
Higher government employment in developed countries
Cross-country comparisons of unemployment rates are difficult for all the following reasons except:
Higher government employment in developed countries.
The Krisp Kracker company which makes unique kettle chips for restaurants, clubs, and events, has just lost a large client that made up 55% of its total revenue. Management finds it necessary to reduce staff or wages. This comes only three months after hiring 35 new people to support this big client. While there are rumors of wage reductions in the short run, the 100 employees who have been with the company for the past two years are grumbling that they are more valuable that the new hires which should be let go and the wages not reduced. The situation at Krisp Kracker illustrates which wage stickiness theory best?
Insider-outsider model
Which of the following describes inflation?
It is an increase in the cost of a given basket of goods.
Based on the following table comparing fictional international country unemployment rates, the country of Ulidia seems to have had fairly low unemployment rate throughout the years until 1985. Ulidia is however, a developing country and with the Ministry of the Economy reporting there is 65% of the labor force participation and 6% unemployment rate in 1985. Knowing it is a developing economy, why might the 6% rate be inaccurate? International Comparison of Unemployment Rates Country1970197519801985 Ulidia 4% 2.8% 3.4% 6.0% Agreriven 7% 6.0% 5.7% 4.5% Saede 3% 4.5% 3.4% 5.2% Galoiri 5% 7.0% 5.5%2.5%
It is inaccurate because Ulidia has a large portion of the working-age population that participates in the informal economy of short-term work, bartering, or other subsistence activities.
In 1985 inflation in Israel reached a record 500%. How did this period of high inflation affect market adjustments towards equilibrium price and quantity?
Markets adjusted to equilibrium more erratically and slowly
Among all high-income countries, which consistently has the lowest long-run unemployment rate in the past 30 years?
Japan
While Japan has enjoyed a persistent low unemployment rate compared to other high-income countries, this may paint too rosy a picture of unemployment in Japan because
Japanese employers are reluctant to formally lay off workers even when there is little real work.
Which of the following is the name used to describe the price index that consists of raw materials and intermediate goods?
Producer Price Index
You are an economist studying the small country of Mardodus. As you look at the data, you see Mardodus has experienced an influx of updated technology to its manufacturing plants, service industry and the medical field in the last three years. This change boosted the growth of the country's productivity by 75%, yet you see that wages have been very slow to respond to this growth. As you begin to analyze the natural unemployment rate for this time frame, what do you most likely discover?
Natural rate of unemployment will decrease because the productivity growth in the short term has passed up wage growth.
During the 1990s worker productivity growth spiked as computers and the internet were introduced to many businesses for the first time. How did this affect the natural unemployment rate?
Natural unemployment decreased as productivity growth outstripped wage growth.
Under ideal conditions inflation should not have any blurring effect on price signals. If wages and prices are rising at a constant 20% then individuals should be able to adjust their expectations accordingly. For example, if the price of bread increased by 20% and the price of the input flour also rose by 20%, the sellers should know that the real price of bread has not changed. The market equilibrium quantity and price has not changed. Why does inflation in the real world result in shortages and surpluses?
Price adjustments are not synchronized or smooth
The Campus Collective company, which creates unique apps for colleges, has recently lost three large university clients that made up 40% of its total revenue. This has hit the company hard and management finds it necessary to reduce staff or wages. The economy also appears to be headed toward a recession and gaining more clients will most likely be harder to accomplish. Because it is a smaller company everyone knows each other and knows there are tough choices ahead. Management brings up the idea of an across the board wage reduction so that no one be let go, but some employees don't believe that a wage cut will be equally applied to all. The employees are also not sure if other people working their same jobs in the economy are getting reduced wages. They start to argue against wage reduction and things get a bit heated. Which of the following theories best illustrate this wage stickiness scenario?
Relative wage coordination argument
Which of the following is a step in calculating a price index?
Selecting the kinds and quantities of goods and services to be included in the index.
Which of the following individuals would be included in the unemployment rate?
Sharon who has been looking for work this last month
What is excluded from the official calculation of the unemployment rate?
Students who are attending to school full time and not working.
What best explains the fluctuations in the unemployment rates over the past 50 years?
The cycles of economic recessions and expansions.
In the past 50 years the unemployment rate has only reached 10% on two occasions. When did these two unemployment spikes occur?
The early 1980s and 2007-2009.
When the federal government calculates the cost of living they use the core inflation index instead of CPI, and use it to make policy decisions. What is one of the reasons to use the core inflation index as opposed to the CPI?
The fluctuations in food and energy prices can be momentary
You have older parents who have been saving for retirement for decades. They are now getting close to retirement age and are looking at their options. One would like to leave everything in the pension fund and draw out a fixed, unchangeable amount over their retirement time. Your other parent wants to take out a chunk of retirement funds and purchase a business and use the profit from it to generate funds on which to live. You have noticed that inflation over the last year is on a rapid rise. What would you advise your parents to do based on what you know of inflation and its redistribution of purchasing power?
You would advise them to buy a business with their retirement funds and keep their money working for them to keep up with inflation.
A price index is
a weighted average price of some type of good or service (e.g. consumer prices)
Fluctuations in the unemployment rates over the past 50 years can best be explained by
cycles of economic expansions and recessions.
Beth has been unemployed for two months from her accounting job. She has interviewed with a number of other firms, but has not received a job offer. Her debt are increasing and at this point she needs to find a job just to cover her expenses at least. She now begins to look for positions in places that pay lower wages that what she would like. What is Beth's experience called in economic terms?
cyclical unemployment
Cyclical unemployment is caused by the ________ for labor ________ during an economy moving from recession to expansion.
demand; moving to the right
The idea that firms will get the most for their money when they pay wages higher than the equilibrium wage is called:
efficiency-wage theory.
Tom graduated from college in June but was still looking for work in August. This is an example of ________.
frictional unemployment
There are certain types of unemployment that exist at all times and determine the natural rate of unemployment. Which of the following types fit this description?
frictional unemployment and structural unemployment
With accelerated inflation In the 1980s middle-class Americans benefited primarily because
in real terms, their home mortgage debts decreased in value
A year ago Parker reached his retirement and left the business to pursue other interests. He is now spending lots of time playing golf and visiting his grandchildren. For purposes of employment he is considered:
out of the labor force.
Compared to developed countries, developing countries...
often lack reliable or regular unemployment statistics.
Which is the smallest expenditure category in the US CPI?
other goods and services
A year ago Parker reached his retirement and left the business to pursue other interests. He is now spending lots of time playing golf and visiting his grandchildren. For purposes of employment he is considered:
out of the labor force
The Producer Price Index is based on prices paid for supplies and inputs by ________.
producers of goods and services
If technological growth and innovation is halted over a protracted period, which CPI bias problem is likely to persist?
substitution bias
The country of Zanzibar has experienced a halt in its technological growth and innovation over a protracted period. Which CPI bias problem is likely to persist in this scenario?
substitution bias
In the supply-demand diagram used to represent events such as cyclical unemployment, the supply (upward-sloping) curve represents ________.
supply of workers for labor
Frictional unemployment occurs because in a world of imperfect information, it takes ________ for people to find jobs.
time