PrQ23: Practice Quiz - Ch. 23: Unemployment and Inflation

Menu costs are the:

real costs of changing listed prices.

A survey reveals that, on a small island, initially 100 people have jobs, 25 people don't have jobs but are looking for jobs, and 45 people are neither working nor looking for work. Suppose that 15 of the 45 people who weren't looking for work now begin looking for work. There are now 40 people looking for work and 100 people working. The unemployment rate:

rises to 28.6%.

The unemployment rate is the ratio of all of the people:

unemployed to those in the labor force.

During a recession:

unemployment increases and the growth rate of real GDP decreases.

The natural level of unemployment contains no_____ unemployment.

cyclical

Internet employment agencies have simplified the job search for the applicants. They have also led to a(n) _____ unemployment.

decrease in frictional

Deflation is a:

decreasing aggregate price level.

Unemployment that is due to the time workers spend in job search is _____ unemployment.

frictional

When labor unions successfully bargain for wage rates that are _____ the equilibrium wage rate, they may cause _____.

higher than; an increase in structural unemployment

Table: Labor Force Data The data in the table is as follows. Employed adults, 200 million. Labor force, 208 million. Unemployed adults, 8 million. Adults not in labor force, 30 million. Non-adults (under 16) population, 40 million. Use Table: Labor Force Distribution. The total population is _____ million.

278

Table: Employment Data The data in the table is as follows. Full-time employed, 20. Not working but looking for work, 2. Part-time employed, 10. Discouraged workers, 1. Use Table: Employment Data. If marginally attached workers are included in the labor force, the labor force is _____ million.

33

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is:

5%.

Which federal agency calculates and reports the official unemployment rate?

Bureau of Labor Statistics

Suppose that a bank wishes to make a 5% rate of return on a one-year loan but expects inflation over the course of the loan to be roughly 3%. Which statement is TRUE?

If the bank charges 8% and the inflation rate is less than 3%, then the bank will have earned a higher rate of return than expected.

Figure: The Effect of a Minimum Wage The horizontal axis represents Quantity of labor and the vertical axis represents Wage rate. three coordinates are marked on the horizontal axis labeled Q subscript D, Q subscript E, and Q subscript S left to right and two coordinates are marked on the vertical axis labeled W subscript E and W subscript F bottom to top. A line with positive slope, labeled Labor supply is drawn across the graph. Another line, with negative slope, labeled Labor demand is drawn. These lines intersect at point E, which is (Q subscript E, W subscript E). A line, parallel to the horizontal axis is drawn at point W subscript F. This line intersects with the Labor demand line at (Q subscript D, W subscript F) and with the Labor supply line at (Q subscript S, W subscript F). These points of intersection are indicated with dotted lines. Use Figure: The Effect of a Minimum Wage. Suppose the labor market is in equilibrium at E when the government imposes a minimum wage of WF. Structural unemployment, assuming all workers without a job are searching, will equal:

QS - QD.

When the unemployment rate is high, there is political demand to increase the benefit period for unemployment compensation. In a standard analysis, doing so will lead to:

increases in the unemployment rate.

To be officially unemployed, a person must:

not have a job and must have looked for work in the past four weeks.

Shoe-leather costs are the costs of:

the increased number of transactions as inflation increases.