Chapter 8 Quizzes

The increased transaction costs caused by inflation are known as:

shoe-leather costs.

Which of the following groups of unemployed are counted in the basic unemployment rate AND the more broadly measured unemployment rate, U6?

A person currently unemployed and searching for a job.

Unemployment due to the time workers spend in job search is called:

frictional unemployment.

Borrowers can lose in a loan contract if:

actual inflation turns out to be lower than expected inflation.

If lenders expect higher inflation in years to come, they will most likely:

increase the nominal rate of interest.

Actual unemployment is equal to:

natural unemployment (frictional & structural) + cyclical unemployment.

Increases in the unemployment rate typically indicate:

periods of economic recession.

To the extent that discouraged workers are present in the economy,

the reported unemployment rate will understate the number of people who are unable to find jobs.

A country's labor force is:

the sum of employment and unemployment.

Frictional unemployment is unemployment due to:

the time workers spend searching for jobs.

Workers who would like to find full-time jobs but are currently working part time are called:

the underemployed.

Costs that arise from the way inflation makes money a less reliable unit of measurement are called:

unit-of-account costs.

Increased costs arising because inflation makes money a less reliable unit of measurement are known as:

unit-of-account costs.

The natural rate of unemployment:

will rise if there is a rise in the number of new workers.

Inflation rate equation:

(Price level in year 2 - Price level in year 1)/Price level in year 1 x 100)

Which of the following statements is true?

Borrowers gain at the expense of lenders if the actual inflation rate is higher than expected. If the actual inflation rate is higher than expected, borrowers repay lenders with money that has a lower value, and so the borrowers gain at the expense of lenders.

Which of the following will NOT cause the natural rate of unemployment to change?

Changes in the number of recessions for any time period

Which of the following is NOT a cause of structural unemployment?

The economy suffers a deep recession.

Which of the following statements is true?

There is a generally strong negative relationship between growth in the economy and the rate of unemployment. Falling real GDP is always associated with a rising rate of unemployment.

Which of the following is a reason why the unemployment rate might overstate the true level of unemployment?

Workers who are confident of finding jobs are still counted as unemployed.

The deviation of the unemployment rate from the natural rate of unemployment is called:

cyclical unemployment.

The unemployment rate can understate the true level of unemployment because it does not count:

discouraged workers, marginally attached workers, and the underemployed.

In response to the high inflation of the late 70s and early 80s, policymakers caused a ______________ and the economy suffered ____________.

rapid disinflation; high unemployment

If a country replaced its currency with a new currency at a ratio of ten units of the old currency equaled to one unit of the new currency, the result would be:

real wages and real income would not change.

The natural rate of unemployment consists of:

structural + frictional unemployment.

A binding minimum wage is likely to cause:

structural unemployment.

Unemployment that results when there are more people seeking jobs in a labor market than there are jobs available at the current wage rate is called:

structural unemployment.