Econ 102 Exam 2 Chapter 5

The Consumer Price Index is a measure of the average of the prices paid by ____ for a fixed basket of consumer goods and services

urban consumers

The unemployment rate is at the natural unemployment rate when

cyclical unemployment equals zero

When a person reenters the labor force and looks for a job after spending time at home raising a child

frictional unemployment increases

When a worker quits a job to look for a better job

frictional unemployment increases

Because of a bank merger, Ms. Davis lost her position as Vice President and had to seek work with other banks. Ms. Davis has the skills necessary to find a new job, thus she is best considered as

frictionally unemployed

An example of the new goods bias in the CPI is the

introduction of hybrid automobiles, vehicles that were not made until recently

Assume the inflation rate falls from 4 percent to 2 percent. This means that

the price level is increasing more slowly

At the end of the last year, the CPI equaled 120. At the end of this year, the CPI equals 132. What is the inflation rate over this year?

10 percent

If the CPI at the end of last year was 100 and CPI at the end of this year was 115, the inflation rate was

15 percent

The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is $1.00 and the price of a pen is $.75. This year, urban consumers each buy 300 oranges at $2.00 each and 850 pens at $1.00 each. The CPI this year is

160

If the basket of goods and services used to calculate the CPI cost $200 in the reference base period and $450 in a later year, the CPI for the latter year equals

225

Suppose the economy is experiencing frictional unemployment of 1 percent, structural unemployment of 3 percent and cyclical unemployment of 4 percent. What is the natural unemployment rate?

4 percent

Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the inflation rate between these years?

5.4 percent

If the working age population is 300 million, with 70 million under the age of 16 and institutionalized, another 70 million not in the labor force, 10 million unemployed and 150 million employed, the employment-to-population ration is

65.2 percent

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

If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the unemployment rate is

9.1 percent

Which of the following decreases the official U-3 unemployment rate?

Workers leave the labor force

From September 2013 to September 2014, the employment-to-population ratio increased from 58.6 percent to 59.0 percent. This change could have been the result of

a decrease in the working-age population

Between September 2013 and September 2014 the number of discouraged workers decreased from 852,000 to 698,000. Assuming the change resulted from discouraged workers starting to make specific efforts to find a job again, this change creates

an increase to the U3 unemployment rate

Structural unemployment is

associated with the general decline of specific industries

The cost of inflation to society includes

both 1 and 2. The opportunity costs of resources used by people to protect themselves against inflation and the diversion of productive resources to forecasting inflation.

Cyclical unemployment

decreases during an expansion

The percentage of people employed aged 16 years and older divided by the working-age population is know as the

employment-to-population ratio

If the inflation rate is negative, the price level in an economy is

falling

When the economy is operating at full employment, the natural unemployment rate consists of only

frictional and structural unemployment

The type of unemployment created by the normal rate of reentry and entry into the labor force is

frictional unemployment

Frictional unemployment

is unemployment associated with normal labor turnover

In September 2014, 32 percent of unemployed workers had been unemployed for 6 months or more. This long-term unemployment is of particular concern because

long-term unemployment is the most costly type of unemployment

The biases in the CPI include the

new goods, quality change, and substitution biases

Which of the following is NOT included in the working-age population

people in prison

The natural unemployment rate

rises with an increase in structural unemployment

In the 1990's, video recordings were made primarily on tapes. However, in the 2000s DVDs became increasingly popular, leading to a sharp decline in video tapes. As a result, many people who manufactured tapes lost their jobs and didn't have the skills necessary to work making DVDs. This occurrence is best consider an example of

structural unemployment

Structural unemployment is the result of

technological change or foreign competition

Cyclical unemployment is the result of

the business cycle

An individual is structurally unemployed if

the individual lacks marketable job skills because technology has changed

Suppose that the price level was 100 in 2011, 110 is 2012, and 130 in 2013. Over these three years

the inflation rate was positive and accelerating

When cyclical unemployment increases and other things remain the same....

the natural unemployment rate does not change