Macro Economics Chapter 5 Quiz Review
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 inflation rate in 2013? (Refer to chart Quiz 5 #4) Hint: inflation rate=CPI current year - CPI last year/ CPI last year x 100
69 %
In an economy, 23 million people are employed and 2 million are unemployed, but 5 million part-time workers would prefer full-time work. What is the unemployment rate?
8 percent
Discouraged workers
people who failed in previous attempt to find jobs and get discouraged (leads to a decrease in the labor force participation rate)
The labor force is defined as
workers with jobs and unemployed workers.
The CPI bias include
1) quality change 2) new product 3) commodity substitution 4) outlet substitution
Based on the following data for the country of Tiny Town, the unemployment rate equals Population = 100 Labor force = 80 Number of employed persons = 70 Number of discouraged workers = 5 Hint: Unemployment rate= # of unemployed/labor force x 100
10/80 × 100.
CPI reference base year is ALWAYS
100
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 the reference base period, 2012? (Refer to chart Quiz 5 #1) Hint: CPI=cost of basket in current year/ cost of basket in base year x 100
100
Suppose the price level this year is 150 and the price level last year was 125. The inflation rate between last year and this year was
20 percent.
In the table above, the number of marginally attached workers is ________. (Refer to chart Quiz #10)
4 million
How do you calculate inflation rate?
CPI in Current year-CPI in last year/ CPI in last year x 100
When price level persistently decreases
Deflation
Which of the following CORRECTLY describes "frictional unemployment"?
Frictional unemployment is a normal occurrence in a growing economy.
When Real GDP is at Potential
Full employment is achieved
When price level persistently rises
Inflation
Marginally attached workers
People who want to work but have stopped looking for jobs
Which of the following people would be counted as is employed in the Current Population Survey?
Rich, who is working 20 hours a week but wants a full-time job
Full employment exists when
There is no cyclical the economy is at the natural employment rate there is only frictional and structural unemployment ALL OF THE ABOVE ANSWERS ARE CORRECT
If the economy enters an expansion
cyclical unemployment decreases.
Natural unemployment
frictional + structural
When the economy is operating at full employment, the natural unemployment rate consists of only
frictional and structural unemployment.
A person quits her job in order to spend time looking for a better-paying job. This type of unemployment is an example of
frictional unemployment
During an economic expansion, real GDP ________ and unemployment ________.
increases; decreases
How do you calculate the labor force participation rate?
labor force/working age population x 100
Consumer Price Index (CPI)
measures average prices of a FIXED basket of commodities purchased by households
Frictional unemployment
normal labor turnover, for the time it takes to find the right job needed.
Price indexes can overstate inflation because they
omit some quality improvements
Full employment occurs
only if the unemployment rate is equal to the natural unemployment rate.
Economic part time workers
someone who wants to work full time but end up in a part time job
When the economy switches production toward services and away from manufacturing and workers in the manufacturing industry are permanently laid off
structural unemployment increases.
Cyclical unemployment is the result of
the business cycle.
Full employment
the level of employment reached when there is no cyclical unemployment
When cyclical unemployment is zero
the unemployment rate equals the natural unemployment rate.
Structural unemployment
type of unemployment that occurs when workers' skills do not match those needed for the jobs available
How do you calculate the unemployment rate?
unemployed/labor force x 100
Cyclical unemployment
unemployment caused by a business cycle recession
When real GDP is above potential output
unemployment is below its natural rate
When real GDP is below potential output
unemployment rises above its natural rate