ECON-Chapter 6

Suppose the town of Treeville has a population of 200, of which 120 are in the labor force. Of those in the labor force, 100 are employed and 20 are unemployed. The unemployment rate in Treeville is _____.

17%

The twin perils of the modern macro economy are said to be:

inflation and unemployment.

For your purchasing power to stay the same, your wages must:

increase at the same rate as inflation.

If your salary was $50,000 last year, and this year you receive a cost-of-living increase tied to the consumer price index (CPI), what will your salary be this year assuming the CPI has risen from 110 to 114?

$51,818

If the price index is 200, how much did a $12 pizza (today) cost in the base year?

$6.00

Suppose a person works hard at a job after graduation and after her first year, her effort is rewarded with a 3% raise when the average wage increase in her company is 2%. Later, the government releases its inflation report and says that the inflation rate is 5%. Given this information, which of these is true regarding her standard of living?

Her standard of living did not improve because the purchasing power of her income is less than what it was last year.

People who are considered unemployed include:

None of those listed is considered unemployed.

The mortgage crisis caused a lot of consumers to stop spending money. The decrease in spending led to a decrease in production. Which type of unemployment resulted?

cyclical

In the beginning of a recovery after a recession, employment begins to rise and the news media reports data on job growth. Which of these is a possible impact of such a report on the labor force?

Discouraged workers will return to the work force.

If actual unemployment is at its natural rate:

inflation is very low.

Suppose a market basket of goods costs $10,000 in 2009, the base period, and that same basket of goods now costs $11,200. What is the consumer price index for the current period?

112.0

An economy has a population of 226,500, of whom 12,500 are unemployed and actively seeking work, and 35,000 have given up looking for a job. Also, 28,000 people work part-time, and 151,000 people work full-time. This economy's unemployment rate is _____.

7.0%

A person has several student loans that have interest rates that change every year. After graduation, he can consolidate these loans into a fixed-rate single loan now or one year from now. How will his expectations of the inflation rate during the next year affect his decision of when to consolidate?

A rise in inflation will cause interest rates to increase, so he will consolidate now.

Which of these criteria is not required for a person to be considered unemployed?

An individual should browse online employment openings.

Which of the following is true about hyperinflation?

Financial assets in a hyperinflated currency quickly become worthless.

Which of the following persons is considered part of the labor force?

Joe, a senior in high school who works part-time on weekends at the ice cream shop

The Bureau of Labor Statistics categorizes unemployed people into several groups, including job leavers, job losers, and discouraged workers. Which of these statements is true?

When there is a prolonged recession, the number of discouraged workers would grow quite fast.

Arlina got a 5% raise while the rate of inflation was 6%. Arlina's standard of living:

fell by 1%.

Teenagers and young people have high unemployment rates because they:

lack the experience and job skills needed for lower unemployment rates.

Which of the following is a problem in measuring consumer prices?

All answer choices are correct.

(Table) According to the table, real GDP for 2014 is approximately:

$7,552 billion.

Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% with the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%:

creditors gain at the expense of debtors.

Which type of unemployment do economists attempt to resolve using economic policy?

cyclical unemployment

All of these are measures of inflation EXCEPT:

domestic price index (DPI).

If Chuck gets laid off from a high paying job and temporarily works as an Uber driver, he is considered:

employed

Core inflation is found by removing _____ from the consumer price index.

food and energy

Which of the following items is NOT included in the GDP deflator?

imported mangoes

The GDP deflator is an index that includes prices of all of the following EXCEPT:

imports

Dave brags to his dad that his $45,000 starting salary as a computer programmer is much higher than his dad's $28,000 starting salary some years ago. If the consumer price index the year Dave begins work is 180.5 while the consumer price index the year his dad started work was 110.8, Dave is:

incorrect; adjusting for price changes, his salary is less than his dad's salary.

Assume that a person just lost his job and decided to take a month-long break to travel to Europe before looking for a new one. Just as he returns home from his trip, he is interviewed by the Department of Labor about his employment status. How would he be classified?

not in the labor force

Jordan Meadows lost his job as an airline pilot and has not been able to find another job as a pilot. Since he is old enough to be eligible for his pension, he decides to retire and devote himself to caring for his elderly parents. According to the Bureau of Labor Statistics, Jordan is:

not in the labor force.

(Table) According to the table, nominal GDP for 2013 is approximately:

$5,050 billion.

Last year, Megan's salary was $65,000 while the consumer price index increased from 109 to 115. If Megan received a cost-of-living adjustment, what would her salary be?

$68,578

If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 is:

125.

If the current year's consumer price index is 214 and last year's consumer price index was 209, then the rate of inflation is:

2.4%

Which of the following would likely NOT cause inflation?

Consumer confidence falls due to global economic concerns.

_____ is a reduction in the rate of inflation.

Disinflation

Since 1987, the U.S. population has grown nearly 32%, while employment has risen by 39%. Further, the number of people unemployed has only risen 3%. Based on the given information, which of these is true?

More people have entered the labor force and are employed; these are signs of a strong labor market.

During periods of inflation, which of the following events does NOT occur?

People on a fixed income have increased standards of living.

Which of the following persons is considered to be unemployed?

Tiffany, who is going on interviews, hoping to get her first job

Which one of the following would NOT lead to higher prices?

an increase in the supply of food

The official unemployment rate as commonly reported by the Department of Labor each month does not include people who:

are underemployed

All of these groups are considered losers when unanticipated inflation occurs EXCEPT:

debtors

If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, then during this period the economy is undergoing:

deflation

Workers who want to work but have been frustrated by the inability to find work and have stopped searching are known as:

discouraged workers.

When the increase in prices goes from 5% to 2%, this is referred to as:

disinflation

Which of these is NOT a type of unemployment?

regional

Frictional unemployment is:

short-term unemployment associated with people who are switching jobs.

Since the invention of automatic teller machines, many bank tellers have lost their jobs. This is an example of _____ unemployment.

structural

If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, then they are experiencing:

structural unemployment.

Janessa was laid off as a photo lab technician because of the lack of customers. She then found a job at a movie rental store, but was again laid off one month later when the store shut down. Janessa's bad luck staying employed is most likely due to:

structural unemployment.

Federal unemployment benefits were extended in 2013, allowing unemployed workers to receive up to 73 weeks of benefits depending on the unemployment rate of each state. This is an extension of a program that was at its peak during the last recession and offered up to a maximum of 99 weeks of unemployment benefits. Extending the federal unemployment benefit program influences the unemployment rate because:

unemployed workers have more time to find a job, meaning they can be more selective, and therefore the unemployment rate rises.