Chapter 6
A type of unemployment that results from business recessions and depressions is known as:
cyclical
During a recession which type of unemployment is likely to increase by the largest amount?
cyclical
A type of unemployment that results from business recessions and depressions is known as:
cyclicall
Both social security benefits and the federal minimum wage are indexed in order to automatically increase as fast as prices.
False
The increase in the price of oil by OPEC during the 1970s caused which type of inflation?
supply
Which type of inflation is considered the more serious problem?
supply
Which subset of the labor force has the highest unemployment rate on average?
teens
How do economists answer the question, "Who is hurt by inflation?"
Anyone who's income does not rise as fast as inflation
Which of the following was not listed in the class notes as a real cost of inflation?
appreciation of the dollar
How does U6, which measures labor underutilization, compare to U3 the official unemployment rate? U6 is:
greater
Which of the following is not cited as a problem in measuring the CPI?
spillovers
If a large number of full-time workers have their hours cut making them part-time workers, the official unemployment rate will:
stay the same
What type of unemployment is described as: "a long term or permanent matching problem between workers and jobs due to a mismatch of skills"?
structural
Last year, Ollie's money income increased by 5% while prices increased by 9%. What has happened to Ollie's real income?
Decreased
An increase in the expected rate of inflation on the part of lenders will cause an increase in the nominal rate of interest.
True
At full employment, some frictional and structural unemployment will still exist.
True
Economists say that people whose incomes rise at least as fast as inflation, are not hurt by inflation.
True
Economists think that the CPI systematically overestimates the true cost of living.
True
If the number of discouraged workers increases, then the reported unemployment rate will understate the true rate of unemployment.
True
If the quality of products improves, the CPI overstates the true increase in prices.
True
In order to be classified as unemployed, a person must not have a job, have been actively looking for work within the past four weeks, and currently be available for work.
True
Inflation tends to have a negative effect on investment and hence on real growth.
True
Since Social Security benefits are indexed, beneficiaries are not hurt by inflation. If the CPI increases by 2.9% then Social Security benefits will increase by 2.9%.
True
Studies show that when unemployment increases in our country, psychological disorders, divorce, and crime also increase.
True
The CPI is a biased/inaccurate measure of the cost of living.
True
The current rate of inflation in the U.S. over the last 12 months has exceeded 5%.
True
Unemployment hurts not only the unemployed but the rest of society as well due to the loss of output, the worsened social environment, etc.
True
Unemployment rates for non-whites, teenagers, and Hispanics are all typically higher than the average overall unemployment rate.
True
Which of the following most closely approximates the current unemployment rate in the U.S.?
0-4.99%
What is the price index in the base period?
100
What has been the increase in prices since the base period if the current price index is 214 ?
114%
If the current CPI = 200, then what used to cost $1 in the base period will now cost:
2
The CPI was 120 in one year and 126 the following year. Approximately how much did prices rise between the two years?
Five percent
Which of the following recipients are not hurt by inflation since their benefits are indexed to the CPI?
Social security
A decrease in Aggregate Supply (AS), other things equal, will result in:
a decrease in RGDP and an increase in the price level
At the onset of a recession, companies may move workers from full-time to part-time. This change will be reflected in the:
aggregate hours of labor input
An increase in Aggregate Demand (AD), other things equal will result in:
an increase in real GDP (RGDP) and an increase in the price level
Last year, Jo's money income increased by 5% while prices increased by 9%. What has happened to Jo's real income?
decreased
An increase in government spending or a personal income tax cut would cause which type of inflation?
demand
How are part time workers classified in the official unemployment figures.
employed
What type of unemployment would least concern an economist?
frictional
An increase in the average level of prices is known as:
inflation
"Full employment" is said to exist when the unemployment rate equals
natural unemployment rate
How are discouraged workers classified as in the official unemployment figures?
not in the labor force
The CPI is an accurate measure of the cost of living.
False
The U.S. has never in any one month achieved full-employment during the last 10 years.
False
Full employment is associated with which unemployment rate?
4-6%
The employment rate and the unemployment rate always move in the opposite direction. When one decreases, the other increases.
False
The term labor force, as defined in the text, refers to all people aged 16 and over.
False
To economists, the concept of full employment is an ideal goal which can't possibly ever be reached.
False
Potential GDP is the GDP which would be produced if the unemployment rate is:
4-6%
The CPI was 138 in one year and 146 the following year. Approximately how much did prices rise between the two years?
5.8 percent
Part time workers are considered unemployed in the official government unemployment figures.
False
Economists agree that everyone is hurt by inflation.
False
More than half of unemployed persons have been unemployed more than 26 weeks.
False
Only the unemployed are hurt by unemployment while everyone is hurt by inflation.
False
In year 1 the CPI is 140, and in year 2 the CPI is 150. If Dennis's salary was $75,000 in year 1, and $82,000 what happened to Dennis's real income?
Increased
Last year my nominal income was $100 and the price index was 200. This year my nominal income is $200 and the price index is 300. What has happened to my real income?
Increased
Which of the following is not a commonly-used price index?
MVPY
IName a real cost of inflation?
Redistribution of income Menu or re-pricing cost Hedging activities Negative effects on investment
Which type of unemployment results from a mismatch of skill between employers and job seekers?
Structural
I Which type of inflation would be associated with a recession?
Supply
If an economy has inflation during a recession, the inflation is likely to be which type?
Supply
With demand inflation, which of the following increases?
both RGDP and prices
How are persons who are retired or engaged in own-home housework classified in the official unemployment figures?
not in the labor force