ECO 230. Quiz: Chapter 9

Your father earned $34,000 per year in 1984. To the nearest dollar, what is that equivalent to in 2014 if the CPI in 2014 is 215 and the CPI in 1984 is 104?

$70,288

As of August 2015, which of the following demographic groups has the highest unemployment rate?

African Americans

Suppose that the economy enters into a recession and that, as a result, Rusty Z. Wrench loses his job as a delivery truck mechanic and remains unemployed. When the economy recovers, Rusty's previous employer rehires him. What is the best classification for his time as an unemployment

Cyclically Unemployed

According to​ Costco's CEO, Jim​ Sinegal: ​"Paying good wages and keeping your people working for you is good business...Imagine that you have​ 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for​ you." What is Costco's CEO referring to?

Efficiency wages

Suppose John Q. Worker is currently unemployed. Each day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of skills, abilities, and interests. If someone ask John Q. what he does for work, he tells them that he is currently "in-between jobs". Which of the following best classifies John Q.'s unemployment status?

Frictionally unemployment

Suppose the fixed interest rate on a loan is​ 5.75% and the rate of inflation is expected to be​ 4.25%. The real interest rate is​ 1.5%. Suppose now that instead of​ 4.25%, the inflation rate unexpectedly reaches​ 5.5%. Who gains and who loses from this unanticipated​ inflation?

Lenders lose from a lower real interest rate Borrowers gain from a lower real interest rate.

At the start of the​ year, the rate of unemployment among U.S. citizens who were between 50 to 60 years old was 7 percent. At the end of the​ year, the same​ age-group reported an unemployment rate of 6 percent.​ However, a newspaper columnist claims that the falling unemployment rate is not an accurate indicator of the overall employment situation of this​ age-group. Which of the​ following, if​ true, would strengthen the​ columnist's claim?

Most people in this group who lost their jobs stopped actively looking for new work.

Which of the following causes change in the CPI to overstate the true inflation rate?

New product bias Increase in quality bias Substitution bias

The unemployment rate

Shows the percentage of the labor force that is considered unemployed.

Even perfectly anticipated inflation imposes costs. Why?

Some wages will fail to keep up with anticipated inflation. Paper money loses its purchasing power by the rate of inflation Menu cost

Bob Wesley believes that structural unemployment should be eliminated in order for an economy to be healthy. In making this argument, which of the following relevant issues is he ignoring?

Structural unemployment will exist in an economy that is innovative.

Guy​ Ferrell, a student who lives in the country​ Paragon, observes that analysts are cutting their growth forecasts for the economy for the coming year. Most of them based their analysis on the fact that the level of inflation in the economy would adversely affect economic growth.​ However, Guy looks up the weekly inflation data for the past couple of months and finds that inflation has been stable and low. Which of the​ following, if​ true, would explain the​ analysts' predictions?

The Producer Price Index has been steadily increasing over the past few months.

John​ Smith, a factory worker at an automobile plant in the city​ Detrigan, makes​ $25 per hour. His​ dad, Larry Smith who retired from a plant in the same city ten years​ back, was earning an average of​ $10 per hour at the time of retirement. Looking at the​ CPI, John concludes that a factory​ worker's purchasing power is lower now compared to ten years ago.​ Larry, however, does not agree that purchasing power has fallen. According to​ him, this conclusion cannot be drawn from such limited data. Which of the​ following, if​ true, would strengthen​ Larry's claim that the CPI calculations are​ inconclusive?

The basket of goods that constitute the CPI is due for its first revision in fifteen years.

Why do economists believe that setting a goal of zero percent unemployment is not feasible or desirable? Creating a goal of zero percent unemployment for an economy is not feasible nor it is desirable because

The economy needs some short-term unemployment in order to allow for better matching of jobs with workers that possess the proper skill sets.

The​ working-age population in Concordia was estimated to be 6.5 million in a certain year. The​ country's labor department announced that the total number of unemployed people in the country had gone up to​ 460,000 during this year​ while, the total number of people out of the labor force decreased to​ 2,000,000. Oscar​ Lewis, a student of labor economics believes that the labor department data is flawed. The government of Concordia adopted expansionary fiscal policies in the last two years with the aim of increasing employment.​ However, the government has been unable to bring down the unemployment rate in the country. Which of the​ following, if​ true, best explains this​ outcome?

The government implemented a generous welfare plan 3 years ago to support people who cannot find work.

The true cost of borrowing and lending is best measured by

The real interest rate.

How do unemployment insurance payments LOADING... in the United States and social insurance programs in other countries increase the unemployment​ rate?

They decrease the opportunity cost of job search.

Maria Tivlinsky and Harry​ Davis, both interns at an economics research institute in the country​ Southville, are discussing the effects of the increase in the supply of unskilled labor in the economy. Maria says that the average nominal wage paid to unskilled labor is likely to fall.​ This, according to​ her, would cause firms to hire more workers and will reduce unemployment in the country. Harry​ however, does not think that unemployment will necessarily​ fall; too many workers looking for jobs could depress wages and employment prospects on the whole. It was observed that overall employment in the country did not increase during the next year. Which of the​ following, if​ true, would explain​ this?

Although the economy is said to be recovering from a recession, prices of goods and service are stilling falling.