Macroeconomics (Chapter 9)

The advice to "keep searching, there are plenty of jobs around here for which you are qualified," would be most appropriate for which of the following types of unemployment?

frictional unemployment

Which of the following would decrease the unemployment rate?

government aid to retrain unemployed workers

Suppose you borrow $1,000 at an interest rate of 12 percent. If the expected real interest rate is 5 percent, then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation

greater than 7 percent

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?

labor force participation rate

If firms pay what are called "efficiency wages," they pay wages that

motivate workers to increase their productivity

If your nominal wage rises faster than the price level, we can say your real wage has _______ and the purchasing power of your income has _______.

risen; risen

Frictional unemployment is the result of

the search process of matching workers with jobs

Suppose your grandfather earned a salary of $12,000 in 1964. If the CPI is 31 in 1964 and 219 in 2013, then the value of your grandfather's salary in 2013 dollars is approximately

$84,775

Looking at the table above, real average hourly earnings equal ________ in 2015.

$9.52

Total population 20,000 Working-age population 15,000 Employment 1,000 Unemployment 100 Consider the data above for a simple economy. Refer to Table 9-1. The labor force participation rate for this simple economy equals

(1,100/15,000) × 100

Suppose the working-age population of a fictional economy falls into the following categories: 90 are retired or homemakers; 60 have full-time employment; 20 have part-time employment; 20 do not have employment, but are actively looking for employment; and 10 would like employment but do not have employment and are not actively looking for employment. The official unemployment rate as calculated by the U.S. Bureau of Labor would equal

(20/100) × 100.

Monthly expenditures for a family of 4 in 2012 averaged $1,400. In 2013, the cost of the same purchases was $1,500. If 2012 is the base year, what was the CPI in 2013?

107

Assume the market basket for the consumer price index has three products - Cokes, hamburgers, and CDs - with the following values in 2011 and 2016 for price and quantity. The CPI of 2016 equals

121

If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest?

3.50%

If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is

5%

If you want to earn a real interest rate of 3% on money you lend, and you expect that inflation will be 2%, what nominal rate of interest will you charge?

5%

Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest. If the inflation rate was 4%, what was the real interest rate you paid?

8 percent

If the number employed is 190 million, the number unemployed is 10 million, and the working-age population is 250 million, then the labor force participation rate is

80%

What impact would including members of the military in employment, labor force, and working-age population statistics have on the unemployment rate and the labor force participation rate?

Including members of the military would reduce the unemployment rate and increase the labor force participation rate

Which of the following is true about the consumer price index?

It assumes that consumers purchase the same amount of each product in the market basket

A consumer price index of 160 in 1996 with a base year of 1982-1996 would mean that the cost of the market basket

Rose 60% from the cost of the market basket in the base year

Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing?

Sarah is not experiencing unemployment of any kind, because she is not currently part of the labor force.

If the CPI rises from 206.7 to 212.7 between two consecutive years, by how much has the cost of living changed between these two years?

The cost of living has increased by 2.9%

You agree to lend $1,000 for one year at a nominal interest rate of 10%. You anticipate that inflation will be 4% over that year. If inflation is instead 3% over that year, which of the following is true?

The person who borrowed the $1,000 will be worse off as a result of the unanticipated decrease in inflation

If we want to use a measure of inflation that foreshadows price change before they affect prices at the retail level, we would base our measure of inflation on

The producer price index

You earned $30,000 in 2000, and your salary rose to $80,000 in 2013. If the CPI rose from 82 to 202 between 2000 and 2013, which of the following is true?

The purchasing power of your salary increased between 2000 and 2013

Which of the following policies would reduce structural unemployment?

a job retraining program

Structural unemployment is the result of

a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs

An example of a seasonally unemployed worker would be

a ski lift operator who loses his job when the snow melts in the spring.

Cyclical unemployment is the result of

a slowdown in the economy.

Minimum wage laws cause unemployment because the legal minimum wage is set

above the market wage, causing labor demand to be less than labor supply

Suppose that in 2016, all prices in the economy double and that all wages and salaries have also doubled. In 2016, you

are no better off or worse off than you were in 2015 as the purchasing power of your salary has remained the same.

Suppose that at the beginning of a loan contract, the real interest rate is 4% and expected inflation is currently 6%. If actual inflation turns out to be 7% over the loan period, then

borrowers gain 1% of the loan value

The substitution bias in the consumer price index refers to the idea that consumers _______ the quantity of products they buy in response to price

change; overestimates

Which of the following price indices comes closest to measuring the cost of living of the typical

consumer price index

If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are

cyclically unemployed.

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

discouraged workers

The real wage equals the nominal wage _______ the CPI, all times 100.

divided by

The labor force equals the number of people

employed plus unemployed.

An advantage of the household survey over the establishment survey of the labor market is that the household survey

includes the number of self-employed persons.

Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would

increase the measured labor force participation rate.

An increase in unemployment insurance payments would, in effect, ________ the amount of time spent searching for a job, which would increase ________ unemployment.

increase; frictional

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey

is based on actual payrolls, rather than on unverified answers.

The cost to firms changing prices

is called a menu cost

The "new product bias" in the consumer price index refers to the idea that

new products' prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers

The stated interest rate on the loan is the

nominal interest rate

Refer to Figure 9-1. Based on the graph of the labor market above, if a minimum wage is set at $5 per hour, which of the following will occur

none of the above will occur

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation, but _______ quality increases. This causes the CPI to _______ the cost of the market basket

not; overstate

Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about

one-half to one percentage point

People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering

structural unemployment

If cyclical unemployment is eliminated in the economy, then

the economy is considered to be at full employment.

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause

the labor force participation rate to decrease

The average price of goods and services in the economy is also known as

the price level

When deflation occurs,

the real interest rate is greater than the nominal interest rate

Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,

the unemployment rate increased.

If inflation is positive and is perfectly anticipated,

those that hold paper money lose

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?

unemployed persons falsely report themselves to be actively looking for a job

Discouraged workers are

workers who have stopped looking for work because they believe there are no jobs for them