HW 3

The natural rate of unemployment is: composed of frictional, structural, and cyclical unemployment. equal to zero. always greater than the actual unemployment rate. composed of structural and frictional unemployment.

composed of structural and frictional unemployment.

According to the Bureau of Labor Statistics, the actual unemployment rate was 8.3% in February 2012 and the natural rate of unemployment was 5.2%. The _____ unemployment rate was _____%. frictional; 4 cyclical; 3.1 structural; 4 cyclical; 14

cyclical; 3.1

During the latter half of the twentieth century, the Soviet Union made more physical capital available to its workers, but this increase resulted in successively smaller increases in productivity. This example illustrates: diminishing returns to human capital. a decline in technology. a declining standard of living. diminishing returns to physical capital.

diminishing returns to physical capital.

The real wage is the wage rate _____ the price level. plus minus divided by multiplied by

divided by

The BEST available measure of the standard of living in a country is: nominal GDP per capita. real GDP per capita. the unemployment rate. the growth rate of productivity.

real GDP per capita.

Menu costs are the: costs of money becoming less reliable. real costs of changing listed prices. increase in the transaction costs caused by inflation. adjustments to the cost of living.

real costs of changing listed prices.

You read in the newspaper that the consumer price index in 2011 was 120. You conclude that a typical market basket in 2011 would have cost _____ more than the same market basket purchased in _____. 20%; 2010 120%; 2010 20%; the base year 120%; the base year

20%; the base year

If there are 100 million people in the total population, a labor force of 50 million, and 47 million employed workers, the unemployment rate is _____%. 3 6 8 10

6

Which example illustrates cyclical unemployment? An autoworker is laid off because a recession has caused a decline in sales. A geologist is permanently laid off from an oil company because of a technological advance. A worker at a fast-food restaurant quits work and attends college. A real estate agent leaves a job in Texas and searches for a similar, higher-paying job in California.

An autoworker is laid off because a recession has caused a decline in sales.

Which statement accurately describes what is happening along a typical aggregate production function? At some point, increasing the amount of physical capital per worker will reduce productivity. Increases in physical capital per worker will always bring about an increase in productivity that is worth the cost of the additional physical capital. Because of diminishing returns, increasing the amount of physical capital per worker will eventually bring smaller and smaller increases in productivity. Adding workers results in real GDP per worker rising at an increasing rate throughout the function.

Because of diminishing returns, increasing the amount of physical capital per worker will eventually bring smaller and smaller increases in productivity.

When the price level increases, everyone becomes poorer. True False

False

A jobless recovery occurs when GDP is growing at a below-average rate and unemployment is rising. True False

True

Most of the rapidly growing Asian nations, though poor, have increased their productivity by providing a very good basic education for their citizens. True False

True

The aggregate price level is a measure of the overall level of prices in the economy. True False

True

The producer price index is also known as the wholesale price index. True False

True

Which country had the LOWEST growth rate of real GDP per capita between 1980 and 2015? Ireland France Argentina Zimbabwe

Zimbabwe

Suppose that a country has a progressive income tax code and taxable income is calculated in nominal terms, but the schedule of income tax rates is NOT indexed to inflation. An individual whose income keeps up with inflation over time will pay: a lower rate of the alternative minimum tax. a lower percentage of income in taxes over time. the same percentage of income in taxes over time. a higher percentage of income in taxes over time.

a higher percentage of income in taxes over time.

One factor that raises the natural rate of unemployment is: a population boom that increases the number of young workers joining the labor force. the loss of labor union membership across industries. the loss of retirement funds so that more people in the baby-boom generation continue to work past the typical retirement age. the use of new technology in the workplace that increases labor productivity.

a population boom that increases the number of young workers joining the labor force.

Economies with high growth rates tend to be those that have: large amounts of natural resources. a stable government that protects property rights. high levels of government regulation. a large defense budget.

a stable government that protects property rights.

Choose the best answer. A price index: always includes a base year. measures the cost of purchasing a market basket of output across different years. is normalized to 100 for the base year. always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.

always includes a base year, measures the cost of purchasing a market basket of output across different years, and is normalized to 100 for the base year.

Which change will NOT increase the productivity of labor? technological improvements You Answered an increase in the capital stock improvements in education an increase in the size of the labor force

an increase in the size of the labor force

Natural resources: are still the most important factor in determining the productivity of human or physical capital for all countries. are the only factor that consistently shows a positive effect on productivity for wealthy countries. are a less significant source of productivity growth in most countries today than in earlier times. can be used to explain the differences in productivity growth among countries.

are a less significant source of productivity growth in most countries today than in earlier times.

To be counted as unemployed, one must: have had a job previously. be out of work and be actively looking for a job during the past four weeks. have had a job before and be actively looking for work. be actively looking for a job and have at least a high-school diploma or its equivalent.

be out of work and be actively looking for a job during the past four weeks.

The labor demand curve is negatively sloped because: more people are willing to work at low wages than at high wages. more people are willing to work at high wages than at low wages. employers are willing to hire more people at low wages. employers are willing to hire more people at high wages.

employers are willing to hire more people at low wages.

Since 1960 in the United States, the rate of inflation has: fluctuated. remained the same. decreased. increased.

fluctuated.

Structural unemployment CANNOT be caused by: a government-mandated floor on the price of labor set above the equilibrium wage. collective bargaining efforts that secure higher wages for unionized workers than for nonunionized workers. offering high wages to attract high-quality workers. granting Social Security benefits to laid-off workers.

granting Social Security benefits to laid-off workers.

A factor that does NOT drive productivity growth is: growth convergence. physical capital. technological progress. human capital.

growth convergence.

Unanticipated inflation: helps those on fixed incomes. hurts borrowers and helps lenders. helps borrowers and hurts lenders. causes interest rates to decrease.

helps borrowers and hurts lenders.

Shoe-leather costs are the: effect of inflation on the prices of food, clothes, and other necessities. increased cost of transactions due to inflation. high price of leather goods. effect of inflation on transportation costs.

increased cost of transactions due to inflation. high price of leather goods.

The main reason South Korea has grown so rapidly is that, because it was so poor: it could take advantage of international financial aid for poor countries. people left to go to more prosperous countries. it could skip forward, or leapfrog, to use new-generation technology as it developed. it could import highly trained engineers from other countries.

it could skip forward, or leapfrog, to use new-generation technology as it developed.

Long-run economic growth depends almost entirely on: labor productivity growth. population growth. agricultural production growth. the number of hours worked.

labor productivity growth.

The purpose of indexing Social Security payments to the consumer price index is to: increase corporate profits. justify continued government funding of the Bureau of Labor Statistics. avoid the privatization of Social Security. maintain the purchasing power of retirees.

maintain the purchasing power of retirees.

You are a college student and NOT working or looking for work. You are: unemployed. in the labor force but not employed. not part of the labor force. counted in the labor force as underemployed.

not part of the labor force.

The inflation rate is the: price level in the current year minus the price level in the previous year. price level in the current year plus the price level in the previous year. percentage change in the price level from one year to the next. price level in the current year multiplied by the price level in the previous year.

percentage change in the price level from one year to the next.

Which item can properly be called a part of infrastructure? robots on an assembly line professors the Golden Gate bridge a Broadway show

the Golden Gate bridge

Unemployment rates tend to decrease when: the economy expands. discouraged workers become active job seekers. underemployed workers become unemployed. the economy contracts.

the economy expands.

If deflation occurs and your income is fixed, your real income: will fall. will go up. will still be equal to your nominal income. is constant.

will go up.