ECO/372T: Principles Of Macroeconomics - Week 2 Practice: Business Cycles, Unemployment, and Inflation

__________ unemployment, which results from fluctuations in the business cycle, generally lasts longer than __________ unemployment.

Blank 1: Cyclical Blank 2: frictional

__________and __________ unemployment are unavoidable and occur naturally in an economy. Need help? Review these concept resources.

Blank 1: Structural or structural Blank 2: frictional or Frictional

The labor force consists of the __________ and the ____________. (Enter one word in each blank.)

Blank 1: employed Blank 2: unemployed

Changing demographics as well as increases in worker mobility may generate additional ___________ unemployment and increase the _____________ rate of unemployment, all else held constant.

Blank 1: frictional Blank 2: natural

Both ______ and _______ unemployment occur naturally in growing as well as contracting economies.

Blank 1: frictional Blank 2: structural

The unemployment rate is the proportion of the _________ _________that is unemployed.

Blank 1: labor, labour, or work Blank 2: force

The producer price index measures the ___________ change in the selling prices received by the producers of goods and services.

average

Click and drag on elements in order Indicate the order in which the U.S. Bureau of Labor Statistics calculates the Consumer Price Index. Instructions Choice 1 of 3. The relative importance or weight of the purchased goods and services is determined. toggle button The relative importance or weight of the purchased goods and services is determined. Choice 2 of 3. Data on detailed consumption habits are collected through interviews and weekly diaries. toggle button Data on detailed consumption habits are collected through interviews and weekly diaries. Choice 3 of 3. An index is computed for the average market basket purchased by the typical consumer. toggle button An index is computed for the average market basket purchased by the typical consumer.

1. Data on detailed consumption habits are collected through interviews and weekly diaries 2. The relative importance, or weights, of the purchased goods and services is determined 3. An index is computed for the average market basked purchased by the typical consumer

The inflation rate equals the: Multiple choice question. value of the CPI in the later year minus the value of the CPI in the earlier year divided by the value of the CPI in the earlier year and divided by 100. value of the CPI in the later year minus the value of the CPI in the earlier year divided by the value of the CPI in the earlier year and multiplied by 100. value of the CPI in the earlier year minus the value of the CPI in the later year divided by the value of the CPI in the later year and divided by 100. value of the CPI in the earlier year minus the value of the CPI in the later year divided by the value of the CPI in the later year and multiplied by 100.

100.

If the labor force is 150 million and the number of employed is 20 million, the number of unemployed equals __________ million workers.

130 or one hundred thirty

The monthly Current Population Survey has been conducted every month since _____ and provides the best picture of the economy's unemployment situation.

1940

If the CPI was 240 in Year 1 and 245.1 in Year 2, what is the inflation rate between year 1 and year 2? Multiple choice question. 2.13% 0.98% 2.08% 1.02%

2.13%

Use the table of information above to calculate the inflation rate between years 1 and 2. Year CPI 1 97.00 2 100.00 3 112.00 Multiple choice question. 3.09% 0.97% 1.03% 3.00%

3.09% Reason: To find the inflation rate: ([CPI2−CPI1]/CPI1)×100=([100−97]/97)×100=3.09%

Suppose there are 150 million workers in the labor force of an economy. Out of those workers, 2.5 million are frictionally unemployed and 3.5 million are structurally unemployed. The natural rate of unemployment in the economy is ______________ percent.

4, 4.00, 4.00%, or 4%

Suppose the labor force in an economy equals 153 million workers. Out of 153 million workers, 145.2 million workers are employed and 7.8 million are unemployed. Hence, the unemployment rate equals _______________ percent. (Round off your answer to one decimal place).

5.1, 5.1%, 5.09, or 5.09%

If the labor force equals 143 million workers and of those 135.5 million workers are employed and 7.5 million are unemployed, the unemployment rate equals ___________ percent. (Round off your answer to one decimal place.)

5.2, 5.2%, 5.20%, 5.24, or 5.24%

The Consumer Price Index (CPI) is constructed using the __________ goods and services purchased by the household.

average or typical

To get a comprehensive picture at both the city and state levels, the Bureau of Labor Statistics includes in its sample around ______ households from all over

60000

The Bureau of Labor Statistics estimates the size of the labor force each month by surveying approximately _________________ households.

60000 or 60,000

The natural rate of unemployment for an economy experiencing frictional unemployment of 3 percent and structural unemployment of 4 percent is ______________ percent.

7

Which of the following would be included as a member of the labor force? Multiple choice question. A full-time college student A recent high school graduate looking for a first job A retired school teacher collecting Social Security benefits A homemaker contributing 15 hours per week as a volunteer worker in a hospital

A recent high school graduate looking for a first job

The period of expansion following a recession when output is increasing but is still lower than its long-run level is known as ________________ .

recovery

Question Mode Matching Question For each of the following items, match the item to the CPI category. Instructions Bread Sweater Bus pass Movie ticket Textbook Prescription drugs Rent Haircut -------------------- Housing Education and communication Recreation Medical care Food & Beverage Apparel Transportation Other Goods and Services

Bread matches Choice Food & Beverage Sweater matches Choice Apparel Bus pass matches Choice Transportation Movie ticket matches Choice Recreation Textbook matches Choice Education and communication Prescription drugs matches Choice Medical care Rent matches Choice Housing Haircut matches Choice Other Goods and Services

Information on national employment and unemployment is collected, analyzed, and reported by the: Multiple choice question. local unemployment offices. National Bureau of Economic Research. Bureau of Labor Statistics. Federal Reserve Bank.

Bureau of Labor Statistics.

An economic indicator used to measure the average price of a market basket of goods and services over time is the: Multiple choice question. Cost Product Index. Consumer Price Index. Cost Price Index. Consumer Product Index.

Consumer Price Index.

__________ unemployment results from fluctuations in the business cycle.

Cyclical

All adults over 16 years of age are included in the labor force. (True or False) True false question. True False

False

___________unemployment happens all the time as people decide to move to different places, learn new skills, and mature in their careers.

Frictional

______ reduces the purchasing power of those receiving an annuity or any other fixed payment over time such as a pension.

Inflation

Vegetables are purchased by a restaurant. Which major group of the CPI does this purchase belong to? Multiple choice question. Recreation It is not included in any CPI category Food and beverage Other goods and services

It is not included in any CPI category

Who among the following is included in the labor force?

People working or actively searching for a job

______________ unemployment is usually the longest type of unemployment. (Enter one word in the blank.)

Structural

Which agency determines when recessions begin and end? Multiple choice question. The Congressional Budget Office The National Bureau of Economic Research The Federal Reserve Bank The General Accounting Office

The National Bureau of Economic Research

Select all that apply Which of the following are true of the trends in the business cycles in the U.S. economy during 2007-2009? Multiple select question. The trough was reached between the second and the third quarters of 2007. The U.S. economy entered into a recession in 2008 and remained there for the first two quarters of 2009. The U.S. economy showed signs of expansion from 2007 to 2009. The peak was reached between the fourth quarter of 2007 and the first quarter of 2008.

The U.S. economy entered into a recession in 2008 and remained there for the first two quarters of 2009. The peak was reached between the fourth quarter of 2007 and the first quarter of 2008.

Which of the following offers an example of structural unemployment?

The rise in unemployment for stable workers after the development of gasoline-powered automobiles and the resulting long-term decline in horse-and-buggy transportation

Not everyone is counted in the labor force. (True or False) True false question. True False

True

The price of a good is a measure of how much money it takes to buy that good. True false question. True False

True

The state of the economy might not completely determine presidential races, but data suggest that there is a connection between the two. (True or False) True false question. True False

True

The CPI is computed by the: Multiple choice question. U.S. Bureau of Labor Statistics. U.S. Cost/Price Board. U.S. Bureau of Inflation Management. U.S. Census Bureau.

U.S. Bureau of Labor Statistics.

The natural rate of ________ equals the sum of the frictional and structural unemployment rates.

Unemployment

Someone needs to be working or actively searching for a job to: Multiple choice question. be part of a job network. receive unemployment. be included in the labor force. receive job training.

be included in the labor force.

The __________________ cycle consists of the short-term fluctuations experienced in an economy due to changes in the levels of economic activity.

business

Short-term fluctuations experienced in the economy due to changes in levels of economic activity: Multiple choice question. can vary in duration but the severity is usually the same. can vary in duration and severity. usually become long-term fluctuations. can vary in severity but the duration is consistent.

can vary in duration and severity.

The Consumer Price Index measures the average price for a market basket of goods and services purchased by the typical (consumer/firm) from one year to the next.

consumer

A sluggish economy will generate some __________ unemployment. (Enter one word in the blank.)

cyclical

Inflation represents a(n) ___________ in someone's ability to buy goods and services.

decrease, reduction, decreases, fall, or decline

Inflation is caused by increases in aggregate

demand

Inflation is caused by increases in aggregate ___________ .

demand

Because ____________ (discouraged/incumbent) workers are no longer looking for work, they are no longer included in the labor force.

discouraged

In the ____________ stage of the business cycle, the real output in an economy increases till it reaches its full capacity.

expansion

If the CPI and the inflation rate calculated from it understate the inflation faced by retirees, then the purchasing power of retirees is: Multiple choice question. unpredictable. falling over time and retirees are becoming worse off. holding steady over time. rising over time and retirees are becoming better off.

falling over time and retirees are becoming worse off.

People who are ____________ unemployed tend to have the shortest lengths of unemployment.

frictionally, friction, or frictional

In an economy, there will always be _____________ unemployed workers searching for positions or in between jobs.

frictionally, frictional, or friction

When someone has stopped actively searching for a position:

he or she is not considered a part of the labor force.

Economists define ________________ as a general increase in the prices of goods and services.

inflation

When calculating the _______ rate in an economy, the most straightforward approach is to compare the price level in one year with the price level in the next year.

inflation

In general, an increase in the money supply causes: Multiple choice question. inflation. an increase in aggregate demand. deflation. no verifiable change in economic variables.

inflation.

In general, an increase in the money supply causes: Multiple choice question. inflation. deflation. no verifiable change in economic variables. an increase in aggregate demand.

inflation.

The ____________ economy consists of under-the-table jobs that are not officially counted in the statistics.

informal or underground

Labor force statistics are collected by the U.S. Bureau of economic ____ Statistics.

labor

A graph of the business cycle shows the: Multiple choice question. level of real GDP on the horizontal axis and time on the vertical axis. level of real GDP on the vertical axis and time on the horizontal axis. price on the vertical axis and time on the horizontal axis. level of real GDP on the vertical axis and price on the horizontal axis.

level of real GDP on the vertical axis and time on the horizontal axis.

The trough phase of the business cycle is characterized by employment and real output being at their _________________ level within a cycle.

lowest, smallest, or minimum

The Bureau of Labor Statistics estimates the size of the labor force each _______________________ .

month

The Consumer Price Index (CPI) is calculated __________. (Give the frequency of CPI calculation. Enter one word in the blank.)

monthly

Technology may also contribute to changes in the frictional and rate ________________ of unemployment.

natural or structural

A fully employed economy is one that is operating at what economists call the: Multiple choice question. expected rate of unemployment. average rate of unemployment. usual rate of unemployment. natural rate of unemployment.

natural rate of unemployment.

Sue was a nurse. She quit her job and is now studying to be a doctor. Sue is: Multiple choice question. employed. unemployed. not part of the labor force. retired. a discouraged worker.

not part of the labor force.

The unemployment rate equals the: Multiple choice question. percentage of unemployed workers divided by the sum of the employed and unemployed workers and multiplied by 100. percentage of employed workers divided by the sum of the employed and unemployed workers and multiplied by 100. number of unemployed workers divided by the sum of the employed and unemployed workers and multiplied by 100. number of unemployed workers multiplied by the sum of the employed and unemployed workers and multiplied by 100.

number of unemployed workers divided by the sum of the employed and unemployed workers and multiplied by 100.

The phase____ of the business cycle represents maximum economic activity.

peak

In the expansion stage of the business cycle, _______________ may be pushed upward due to increases in resource utilization and income. (Use one word for the blank.)

prices or price

The producer price index measures changes in producers'

prices or price

If the CPI and the inflation rate calculated overstate the true level of inflation in the economy, then the purchasing power of retirees is: Multiple choice question. holding steady over time. rising over time and retirees are becoming better off. falling over time and retirees are becoming worse off. unpredictable.

rising over time and retirees are becoming better off.

Job-retraining programs or financial assistance to attend college can help the _____ unemployed acquire new skills.

structural

Select all that apply From 1979 to 2019, real earnings decreased for those having only a high school education or less. Among the possible explanations for this trend offered by economists are: Multiple select question. the educational system in the U.S. has lost ground to other countries. technological change occurring in recent decades has increased the demand for people with more education. inflation affects those with less education more than it does those with more education. globalization has helped those with greater education more than those with less education.

technological change occurring in recent decades has increased the demand for people with more education. globalization has helped those with greater education more than those with less education.

The consumer price index (CPI) measures: Multiple choice question. the average price of all goods and services. the average price of a market basket of goods. the total price of a market basket of goods. the total price of all goods and services.

the average price of a market basket of goods.

For the average worker in the United States,: Multiple choice question. the higher the unemployment rate all else held the same the fewer unemployed people are looking for jobs and the less time someone is likely to be searching for a position. the lower the unemployment rate all else held the same the more unemployed people are looking for jobs and the longer someone is likely to be searching for a position. the higher the unemployment rate all else held the same the more unemployed people are looking for jobs and the less time someone is likely to be searching for a position. the higher the unemployment rate all else held the same the more unemployed people are looking for jobs and the longer someone is likely to be searching for a position.

the higher the unemployment rate all else held the same the more unemployed people are looking for jobs and the longer someone is likely to be searching for a position.

Since 2000, the labor force participation rate has decreased because: Multiple select question. there are more discouraged workers. the definition of the labor force has changed. the overall population has decreased. baby boomers are retiring and leaving the labor force. more and more people have shifted to the informal economy. family sizes have shrank.

there are more discouraged workers. baby boomers are retiring and leaving the labor force. more and more people have shifted to the informal economy.

Unemployment benefits have nothing to do with the unemployment calculations conducted by the Bureau of Labor Statistic

true

If discouraged workers see an improvement in economic conditions, they could decide to reenter the labor market start looking for work and be counted as ____________. (Use one word for the blank.)

unemployed

James is a 35-year-old teacher who lost his job. He is currently looking for work. James is: Multiple choice question. retired. unemployed. employed. a discouraged worker.

unemployed.

Kathy is a pilot who lost her job and is looking for work. She is 29 years old. Kathy is: Multiple choice question. unemployed. retired. employed. a discouraged worker.

unemployed.

The labor force is important because it is the basis for calculating __________ the rate.

unemployment

The size of the ________ rate in an economy is an indicator of how hard it may be for a person to find another job.

unemployment

When the size of the labor force stays constant, a decrease in the _____________ rate is a good indicator for assessing the overall health of an economy.

unemployment

The labor force is important because it is the basis for calculating the: Multiple choice question. unemployment rate. real GDP growth rate. inflation rate. interest rate.

unemployment rate.

The National Bureau of Economic Research determines: Multiple choice question. the money supply. when business cycles begin and end. the tax rate and the interest rate. the interest rate and the unemployment rate.

when business cycles begin and end.