Macro

(Figure: Labor Supply and Demand) Refer to the figure. What is the quantity of labor that is unemployed as a result of the labor union's action to increase its wage demands to $11 an hour?

1000

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. In which year(s) did the country experience deflation?

2009 only

(Figure: Three AD Curves) Beginning at Point A in the accompanying diagram, a positive money shock could result in a short-run growth rate of:

3%

Jordan loaned Taylor $1,200 on March 15, 2009. Taylor returned $1,260 on March 14, 2010. Inflation was 2% over the 1-year period. What is the real interest rate that Taylor paid?

3%

For an aggregate demand curve with = 10% and = 0%, if inflation is 6%, then real growth is:

4%

(Figure: Labor Market) Refer to the figure. What is the unemployment rate in this market as a result of the implementation of a $10 minimum wage?

50%

TEST which type of unemployment is likely to be higher when real GDP growth is lower.

Cyclical unemployment

Which of the following correctly represents unexpected disinflation?

Eπ > π

TEST Which of the following is a case of frictional unemployment.

Tina was laid off temporarily while her company downsized.

Which of the following is a negative real shock that occurred during the Great Depression

Widespread bank failures led to a reduction in the productivity of financial intermediation.

The consumer price index measures the prices of:

a basket of goods bought by a typical American consumer.

The primary purpose of the AD-AS model is to explain

business fluctuations

Unemployment correlated with the ups and downs of the business cycle is called:

cyclical unemployment.

f you earned $10-an-hour in 2005 when the CPI was 100, and you earn $11-an-hour today when the CPI is 120, then your real wage rate has _____ since 2005.

decreased

(Figure: Long-Run Aggregate Supply Curves) Which of the following can explain the shift of the long-run aggregate supply curve from A to B in the figure?

development of new technology

TEST If the inflation rate falls fro 4% i 2005 to 2% in 2006, then

disinflation has occurred

The primary reason we think of inflation as bad even when wages rise with it is that it:

distorts the information delivered by prices

Active labor market policies:

focus on getting unemployed workers back to work.

If a national government improves its unemployment benefits, its unemployment rate will most likely:

increase

If the velocity of money and real GDP are fixed, then the quantity theory of money implies that the price level will:

ncrease at the same rate as the growth in the money supply.

Discouraged workers are workers who have:

understated.

Which of the following does NOT contribute directly to the persistence of structural unemployment?

work tests

Nominal wage confusion occurs when

workers respond to their nominal wage instead of to their real wage

If = 4%, = 3%, and = 2%, then must equal:

1%

In the AD-AS model with a long-run potential growth rate of 2%, a 6 percentage point increase in the money supply growth rate will cause the economy's growth rate to be _____ in the long run.

2%

Suppose the money supply equals $100 million, the average price level equals 40, and real GDP equals $50 million. Given this information, the velocity of money equals:

20

A A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is this country's labor force participation rate?country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is this country's unemployment rate?

25%

If the growth rate of the money supply in an economy is 5%, the growth rate of output is 2%, and the velocity of money is constant, what will the inflation rate in this economy be?

3%

Which of the following individuals can be counted as unemployed?

66.7%

TEST Adult population 200 million labor force 150 million employed persons 138.75 million Discouraged workers 10.5 million According to the accompanying labor data, the unemployment rate is

7.5%

TEST Adult population 200 million labor force 150 million employed persons 138.75 million Discouraged workers 10.5 million According to the accompanying labor data, the labor force participation rate is

75%

If the average price level rises from 120 in year 1 to 130 in year 2, the inflation rate between years 1 and 2 will be:

8.33%

TEST if the average price level rises from 120 in year 1 to 130 in year 2, the inflation rate between year 1 and 2 will be

8.33%

Which of the following best describes the conditions during the Great Depression?

Both real GDP growth and inflation were negative.

TEST In a non-recession year, the majority of U.S. unemployment is

Frictional

If stock prices go up and people feel richer, aggregate demand will

Increase

If spending in an economy increases by 3% and real GDP increases by 1%, the result will be:

Inflation

Which of the following would be considered unemployed?

Janice, a senior in college, started job hunting early in the hope that she would have secured a job by the time she graduates in May.

The presence of discouraged workers causes the measured unemployment rate to be:

Jean, who left her job to search for a higher-paying position

TEST Over the past few decades, the US economy has switched from a primarily manufacturing economy to a service economy. Many individuals working in manufacturing position lost their jobs, and many new jobs open up in service. For those who lost jobs in manufacturing this is an example of:

Structural Unemployment

(Figure: Two SRAS Curves) The figure shows the AD-AS model with two SRAS curves. Which of the following is TRUE of Point A?

The actual inflation rate and the expected inflation rate are both 5%

TSET Which of the following statements about the employment at will doctrine is True

The doctrine helps lower labor hiring and firing costs, leading to higher unemployment rates

If the actual rate of inflation turns out to be higher than the expected rate of inflation, what happens to the growth rate of output before expectations are updated?

The growth rate is higher than the Solow growth rate.

According to the quantity theory of money, if both the growth rate of the money supply and the velocity of money are fixed, then a higher inflation rate means

a lower real growth rate.

The cost a business faces when changing prices in response to an economic shock is called

a menu cost.

Wages are sticky when:

abor unions set wage contracts for a certain period of time

During the Internet revolution in the late 1990s, a positive real shock shifted the long-run aggregate supply curve to the right, which led to:

an increase in real growth rate and decrease in the inflation rate.

Consider the three aggregate demand curves shown in the graph. Movement from Point A to Point D represents:

an increase in spending growth from 4% to 6%

(Table: Consumer Price Index) Refer to the CPI values in the table for the years 2005 to 2010. In which year(s) did the country experience disinflation?

booth 2007 and 2009

An increase in _____ will shift the SRAS curve

expected inflation, but not actual inflation

The short-term unemployment caused by the ordinary difficulties of matching employee to employer is called:

frictional unemployment.

Discouraged workers are workers who have:

given up looking for work but would still like a job.

In the basic model with an AD and LRAS curve only, if spending growth is 10% and the Solow growth rate falls from 5% to 3%, then inflation will:

increase from 5% to 7%

Debt monetization means that a government pays off its debt by:

increasing the money supply.

Which of the following combinations would be on an aggregate demand curve with a spending growth rate of 6%?

inflation rate of 8%, real growth rate of -2%

TEST If employers can fire an employee for any reason, other things being equal

it will be easier for job seekers to find employment

TEST Wich of the following indiviuals can be counted as Unemployed?

jean, who left her job to look for a higher paying position.

Nobel Prize-winning economist Milton Friedman says, "Inflation is always and everywhere a _____."

monetary phenomenon

The term "business fluctuations" refers to:

movement in real GDP around its long-term trend

(Figure: Two SRAS Curves) The figure shows the AD-AS model with two SRAS curves. If the economy is initially at Point A and expected inflation rate remains unchanged, the economy can achieve a real GDP growth rate of 9% only by

moving along SRAS1 to Point B

(Figure: Long-Run Aggregate Supply Curves) Which of the following can explain the shift of the long-run aggregate supply curve from A to C in the figure?

negative supply shock

An increase in consumer pessimism will lead to increased inflation in

neither the short run nor the long run

With respect to real output, in the long run, money is:

neutral.

An increase in inflation will cause the long-run aggregate supply curve to:

not shift at all.

The short-run aggregate supply curve shows the _____ relationship between the inflation rate and real growth during the period when prices and wages are _____

positive; sticky

If spending growth is 6% and inflation is also 6%, this means that:

real GDP did not increase

TEST When workers loose their jobs and become officialy unemployed the number of people in the labor force remain

remain constant

Oil shocks, the shift from manufacturing to service jobs, and the use of new technologies are reasons for _____ unemployment.

structural

A worker repairing VHS cassette-tape players was laid off because most of his customers have started using DVD players. This worker is now:

structurally unemployed.

TEST Which of the following does NOT contribute directly to the persistence of structural unemployment

work tests