ECON 102 - Sample Test 2 (Chapter 5)

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

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

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.

A

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.

A

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

A

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

B

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

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.

B

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

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

B

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.

C

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

C

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

C

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.

C

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

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

C

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

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

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

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

D

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.

D