ECON 102: Chapter 5

C

10) The labor force is defined as A) people with full time jobs. B) all people capable of work. C) workers with jobs and unemployed workers. D) All of the above answers are correct.

C

11) The percentage of the people of working age who have jobs is called the ________. A) inverse of the unemployment rate B) employment-to-working-age-population ratio C) employment-to-population ratio D) labor force

B

12) The above table shows answers given by people interviewed in a government survey of households. Which individuals are considered to be a part of the labor force? A) C and D B) A, B, and C C) A, C, and D D) B, C, and D

C

13) In the above table, the number of marginally attached workers is A) 100 million. B) 55 million. C) 15 million. D) 40 million.

D

14) Which of the following statements is INCORRECT? A) The labor-force participation rate is the labor force divided by the working-age population then times 100. B) The labor force is equal to the number of people employed plus the number of people unemployed. C) The unemployment rate is the number of persons who are unemployed divided by the labor force then times 100. D) The working age population includes everyone over the age of 16.

C

15) In a country with a working-age population of 300 million, 230 million workers are employed and 40 million workers are unemployed. What is the labor force participation rate? A) 5 percent B) 65 percent C) 90 percent D) 100 percent

C

16) Which of the following people would be counted as is employed in the Current Population Survey? A) April, who just graduated from college and is looking for work B) Jason, who was laid off from work less than 6 months ago but who has stopped looking for work C) Rich, who is working 20 hours a week but wants a full-time job D) Misty, who just quit her job to return full-time to school

D

17) If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the labor force participation rate is A) 64.3 percent. B) 71.4 percent. C) 66.6 percent. D) 78.6 percent.

A

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

D

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

C

19) The natural unemployment rate ________. A) equals zero B) is the same from year to year C) is the unemployment rate when there is no cyclical unemployment D) is greater than the actual rate of unemployment

D

2) The official U-3 unemployment rate includes the total number of people who A) have jobs or are currently looking for jobs. B) would like to have a job but have stopped seeking work. C) would like to have a full-time job but are working part-time. D) are available and looking for work but unable to find employment.

D

20) 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) cyclically unemployed. B) structurally unemployed. C) naturally unemployed. D) frictionally unemployed.

D

21) An observer of the economy notices that over the past 12 months the unemployment rate has fallen from 7.0 percent to 6.5 percent. During the same time, the rate of growth in real GDP has been positive. From this information we might conclude that A) a recession is in progress. B) a trough in the business cycle will soon be reached. C) inflation is not occurring. D) an expansion is occurring in the economy.

B

22) Frictional unemployment comes about because of A) a general economic slowdown. B) normal labor market turnover. C) friction between labor and management. D) a mismatch between skills and available jobs.

A

23) Catherine quit her job in order to look for a new one; therefore, she is best considered as A) frictionally unemployed. B) cyclically unemployed. C) seasonally unemployed. D) structurally unemployed.

C

24) A recession causes a decrease in the demand for housing, resulting in substantial layoffs in the construction industry. The people laid off are considered A) seasonally unemployment. B) structurally unemployment. C) cyclically unemployment. D) frictionally unemployment.

A

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) structural unemployment decreases. C) cyclical unemployment increases. D) frictional and cyclical unemployment increase

B

26) When a student finishes college and begins looking for work A) frictional and cyclical unemployment increase. B) frictional unemployment increases. C) structural unemployment increases. D) cyclical unemployment increases.

B

27) Auto and steel workers commonly experience this type of unemployment in a recession. A) structural unemployment B) cyclical unemployment C) natural unemployment rate D) frictional unemployment

A

28) Structural unemployment A) generally lasts longer than frictional unemployment. B) falls during the expansion phase of the business cycle. C) falls as the pace of technological progress increases. D) falls when the government provides more generous unemployment compensation benefits.

A

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

B

3) The labor force is defined as the number of people who A) would like to have a job but have stopped seeking work. B) are employed plus the number of people who are unemployed. C) would like to have a full-time job but are working part-time. D) are available and looking for work but are unable to find employment.

A

30) Unemployment caused by changes in technology is called ________ unemployment. A) structural B) frictional C) cyclical D) techno

B

31) The relationship between the unemployment rate and the natural unemployment rate is that the unemployment rate A) equals the natural rate. B) fluctuates about the natural rate. C) is always below the natural rate. D) is always above the natural rate.

C

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

D

33) The best example of a frictionally unemployed individual is A) Sandy who has few skills and is no longer looking for work. B) Charles who has lost his job as an autoworker because of increased imports and can't find a good job that utilizes his skills. C) Sam who lost his job as a real estate salesperson when the housing market went soft because of a recession. D) Mary who quit her job to find work closer to her home.

A

34) Bill is a high-school dropout who lost his job in a fast food restaurant when the economy plunged into a recession. After 8 months, Bill is still looking for work. He is an example of A) cyclical unemployment. B) structural unemployment. C) the natural unemployment rate. D) frictional unemployment

A

35) If the CPI was 122.3 at the end of last year and 124.5 at the end of this year, the inflation rate over these two years was A) 1.8 percent. B) 18.0 percent. C) 22.5 percent. D) 2.5 percent.

C

36) 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) urban wage earners and clerical workers B) consumers living in cities with a population greater than 100,000 C) urban consumers D) all consumers

B

37) 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.

A

38) In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the CPI in 2013? A) 169 B) 129 C) 59 D) 102

B

39) The consumer price index (CPI) A) is the ratio of the average price of a typical basket of goods to the cost of producing those goods. B) compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period. C) measures the increase in the prices of the goods included in GDP. D) compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period 2.

C

4) Using the information in the above table, the unemployment rate is A) 4.5 percent. B) 6.0 percent. C) 4.3 percent. D) 2.8 percent.

C

40) The cost of inflation to society includes A) the lost spending when people do not have enough money. B) higher interest rates paid by borrowers. C) unpredictable changes in the value of money. D) higher interest rates paid by the government on its debt.

A

41) Of the following sequences of price levels, which CORRECTLY represents a 5 percent inflation rate? A) 100, 105, 110.25, 115.76 B) 100, 100, 100, 100 C) 100, 105, 105, 105 D) 100, 105, 110, 115

A

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

C

43) If the price level last year was 220 and this year is 250, what is the inflation rate between the two years? A) 12.2 percent B) 30 percent C) 13.6 percent D) 20 percent

D

44) Suppose the CPI last year is 121 and the CPI this year is 137. The CORRECT method to calculate the inflation rate is A) 137 × 121 = 258. B) (137/121) × 100 = 113.2. C) (137 - 121)/100 = 0.16. D) [(137 - 121)/121] × 100 = 13.2.

D

45) The information in the table above gives the 2012 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2013 prices. What is the value of the CPI for 2013? A) 75 B) 100 C) 133 D) 140

C

46) The bias in the CPI typically A) about half the time overstates and about half the time understates the inflation rate. B) cannot be measured or estimated. C) overstates inflation. D) understates inflation.

D

47) The first step in measuring the CPI is to A) conduct a monthly survey. B) collect prices for the basket of goods and services. C) interview businesses. D) select the market basket.

B

48) 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) 115 percent. B) 15 percent. C) 100 percent. D) 1.5 percent.

B

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) 325. B) 225. C) 450. D) 200.

C

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

C

50) In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the cost of the CPI basket in 2013? A) $335 B) $320 C) $540 D) $430

B

6) Which of the following is NOT considered to be in the labor force? A) a person who is waiting to start a new job in the next 30 days B) a person who is not working and who has not tried to find a job C) a student who works part-time D) a person who is not working but who has tried to find a job in the past week

A

7) Which labor market statistic tends to rise during recessions and fall during expansions? A) the unemployment rate B) the employment-to-population ratio C) the labor-force participation rate D) aggregate hours

A

8) The employment-to-population ratio is equal to the number of A) employed people divided by the working-age population then multiplied by 100. B) unemployed people divided by the working age population then multiplied by 100. C) unemployed people divided by the total population then multiplied by 100. D) employed people divided by the total population then multiplied by 100.

D

9) Full-time students and prisoners are ________. A) counted as discouraged workers B) counted as unemployed C) in the labor force D) not in the labor force