Macroeconomics HW 4
The sum of employed and unemployed workers in the economy.
How to calculate the labor force?
A
When deflation occurs, A) the real interest rate is greater than the nominal interest rate. B) the nominal interest rate is greater than the real interest rate. C) the nominal interest rate is equal to the real interest rate and inflation is negative. D) the nominal interest rate is equal to the real interest rate and inflation is positive.
C
When the price of gasoline rises, some consumers begin riding their bikes more frequently or riding the bus instead of driving their cars. The fact that the CPI does not fully account for such changes in consumer behavior is called A) outlet bias. B) increase in quality bias. C) substitution bias. D) discrimination bias.
D
A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket A) equaled $160 in 1996. B) equaled $160 in 1983. C) rose 160% from the cost of the market basket in the base year. D) rose 60% from the cost of the market basket in the base year.
A
An efficiency wage A) is higher than the market wage and tends to increase productivity. B) is lower than the market wage and tends to increase productivity. C) is higher than the market wage and tends to decrease productivity. D) is lower than the market wage and tends to decrease productivity.
C
If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then A) changes in the CPI accurately reflect the true rate of inflation. B) changes in the CPI understate the true rate of inflation. C) changes in the CPI overstate the true rate of inflation. D) changes in the CPI are unrelated to the true rate of inflation.
B
If the minimum wage is set above the market wage, A) the quantity of labor supplied will be below the quantity of labor demanded. B) unemployment will rise. C) highly-skilled workers will have a harder time finding jobs. D) All of the above are correct.
D
If the nominal rate of interest is 6.5% and the inflation rate is 3.0%, what is the real rate of interest? A) -9.5% B) -3.5% C) 1.5% D) 3.5% E) 9.5%
C
If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would A) increase. B) remain the same. C) decrease. D) equal 20%.
A
If we want to use a measure of inflation that foreshadows price changes before they affect prices at the retail level, we would base our measure of inflation on A) the producer price index. B) the consumer price index. C) the GDP deflator. D) the household price index.
D
Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid? A) 17 percent B) 10 percent C) 7 percent D) 3 percent
D
Minimum wage laws cause unemployment because the legal minimum wage is set A) below the market wage, causing labor demand to be greater than labor supply. B) below the market wage, causing labor demand to be less than labor supply. C) above the market wage, causing labor demand to be greater than labor supply. D) above the market wage, causing labor demand to be less than labor supply. E) too low.
B
Monthly expenditures for a family of 4 in2010 averaged $1,400. In 2011, the cost of the same purchases was $1,500. If 2010 is the base year, what was the CPI in 2011? A) 110 B) 107 C) 100 D) 93
Retirees, homemakers, students, active military members, prisoners
People not in the labor force include
B
Suppose an economy has only three goods and the typical family purchases the amounts given in the table below. If 2006 is the base year, then what is the CPI for 2011? A) 14.3 B) 87.5 C) 114.3 D) 160
A
The United States has ________ social insurance programs, and generally has a ________ unemployment rate, as compared to Canada and Western Europe. A) less generous; lower B) less generous; greater C) more generous; lower D) more generous; greater
C
The nominal interest rate equals the real interest rate ________ the inflation rate. A) times B) divided by C) plus D) minus
B
The stated interest rate on a loan is the A) real interest rate. B) nominal interest rate. C) actual inflation rate. D) expected inflation rate.
B
Which of the following policies would reduce structural unemployment? A) an increase in the minimum wage B) a job retraining program C) implementing an unemployment insurance policy D) building an on-line job database that helps workers find jobs
C
Which of the following would increase the unemployment rate? A) a law making it illegal to work more than 35 hours per week B) a cut in unemployment compensation C) an increase in unemployment insurance payments D) a decrease in the minimum wage
You are unemployed or employed
You are in the labor force if?
