Question 1

When workers are unemployed due to a mismatch between their skills and the jobs available, economists call this

Accepted Answer

Structural unemployment refers to the type of unemployment that occurs due to a mismatch between the skills of the workforce and the available job opportunities. This type of unemployment arises due to changes in technology or shifts in the demand for certain kinds of goods and services, leading to a permanent decline in the demand for certain types of labor.

Question 2

Which of the following about unemployment is true?

Accepted Answer

High unemployment rates over lengthy time periods are indicative of structural factors that are adversely affecting the natural rate of unemployment. This is because the natural rate of unemployment is the rate that exists when the economy is at full employment and there is frictional and structural unemployment present. However, if there are structural factors (such as technological changes, skills mismatch, or changes in the labor force demographics) that are causing unemployment to persistently remain above the natural rate, then it is considered a structural problem.

Question 3

High and variable rates of inflation will

Accepted Answer

High and variable rates of inflation can distort the information delivered by market prices, making it difficult for individuals and businesses to make informed economic decisions. For example, if prices are rapidly rising, it may be difficult to distinguish whether an increase in a particular good or service is due to changes in supply and demand or simply due to inflation.

Question 4

If a country's population (age 16 and over) is 50 million, with 2 million unemployed and 23 million currently holding jobs, the

Accepted Answer

Total labor force = number of employed + number of unemployed = 23 million + 2 million = 25 million
Unemployment rate = (Number of unemployed / Total labor force) x 100
= (2 million / 25 million) x 100
= 8.0 percent
Labor force participation rate = (Total labor force / population age 16 and over) x 100
= (25 million / 50 million) x 100
= 50 percent

Question 5

Which of the following is an example of someone with inflationary expectations taking a step designed to insulate themselves from the higher expected rates of inflation?

Accepted Answer

When a consumer borrows money at a fixed interest rate, they are insulating themselves from higher expected rates of inflation because the interest rate on the loan will not change even if inflation increases. Delaying the purchase of a new home or automobile (choice A) does not necessarily insulate the consumer from higher expected rates of inflation. Borrowing funds at an adjustable interest rate (choice C) or variable interest rate (choice D) can expose the borrower to higher interest payments if inflation increases.

Question 6

During the last several decades the labor force participation rate

Accepted Answer

The labor force participation rate of women has indeed increased substantially over the last several decades, while the participation rate of men has either remained steady or declined slightly.

Question 7

Which of the following is a true statement?

Accepted Answer

Potential output is considered the maximum sustainable output an economy can achieve under normal circumstances, without causing inflation to rise.

Question 8

A person who argues that inflation "robs us of the purchasing power of our paychecks" should also consider that inflation

Accepted Answer

The answer of A person who argues that inflation "robs...

Question 9

Which of the following is a true statement?

Accepted Answer

Unanticipated inflation is indeed a change in the general level of prices that catches most decision makers by surprise, making it difficult for them to adjust their plans accordingly.

Question 10

At the beginning of a year, decision makers expect the general level of prices to increase at a 3 percent annual rate. The CPI increases from 150 to 154.5 during the year; this is an example of

Accepted Answer

The increase in the CPI from 150 to 154.5 corresponds to a 3 percent annual rate of inflation, which is exactly what decision makers expected. Therefore, this is an increase in the general level of prices that was accurately anticipated.

Question 11

The stages of a business cycle, in order, are

Accepted Answer

The answer of The stages of a business cycle, in...

Question 12

Which of the following is true of high and variable rates of inflation?

Accepted Answer

High and variable rates of inflation create uncertainty, making it difficult for people to accurately forecast next year's rate of inflation. As a result, businesses might be hesitant to undertake long-term investments or make purchases, and households may curb spending or hold off on making large purchases, such as a car or home.

Question 13

Which of the following will most likely occur during the expansionary phase of a business cycle?

Accepted Answer

During the expansionary phase of a business cycle, economic activity increases, leading to a rise in real GDP and a decrease in the unemployment rate as more jobs are created.

Question 14

Which of the following is a danger of inflation?

Accepted Answer

Inflation can lead to price changes, which can affect individuals who have signed long-term contracts such as rental agreements, leases, or employment contracts. These contracts may not have provisions for inflation adjustments, leading to financial strain on individuals.

Question 15

If the consumer price index (CPI) was 125 at year-end of 2008 and 132.5 at year-end 2009, inflation during 2009 was

Accepted Answer

Inflation is calculated as the percentage increase in the CPI from one year to the next. Therefore, inflation during 2009 can be calculated as [(132.5-125)/125] x 100 = 6.0 percent.

Question 16

At the beginning of a year, decision makers expect the general level of prices to increase at a 6 percent annual rate. The CPI increases from 150 to 154.5 during the year; this indicates that

Accepted Answer

The actual CPI increase was 2.5 points, which is less than the expected increase of 6 points. This means decision makers overestimated the rate of inflation during the year.

Question 17

Sophia is tending to her home garden while awaiting recall from her seasonal part-time job. The Bureau of Labor Statistics would classify Sophia as

Accepted Answer

The answer of Sophia is tending to her home garden...

Question 18

The natural rate of unemployment

Accepted Answer

The natural rate of unemployment is the rate of unemployment present when the economy is operating at full employment, which means that all available labor resources are being utilized efficiently. It is not an artificially low rate that cannot be maintained (A) or a constant rate that is unaffected by changes in public policy (B). It is also not equal to the number of persons unemployed divided by the number in the labor force (D), as this is the current unemployment rate rather than the natural rate.

Question 19

Which of the following is true?

Accepted Answer

Inflation generally leads to an increase in the nominal values of both prices and wages, as the overall price level in the economy rises.

Question 20

Which of the following is a danger of high rates of inflation?

Accepted Answer

High rates of inflation can lead to people spending less time producing, as they may be more focused on trying to protect the value of their assets. This can lead to a decrease in productivity and economic growth.

Quiz 8: Economic Fluctuations, Unemployment, and Inflation

When workers are unemployed due to a mismatch between their skills and the jobs available, economists call this

Which of the following about unemployment is true?

High and variable rates of inflation will

If a country's population (age 16 and over) is 50 million, with 2 million unemployed and 23 million currently holding jobs, the

Which of the following is an example of someone with inflationary expectations taking a step designed to insulate themselves from the higher expected rates of inflation?

During the last several decades the labor force participation rate

Which of the following is a true statement?

A person who argues that inflation "robs us of the purchasing power of our paychecks" should also consider that inflation

Which of the following is a true statement?

At the beginning of a year, decision makers expect the general level of prices to increase at a 3 percent annual rate. The CPI increases from 150 to 154.5 during the year; this is an example of

The stages of a business cycle, in order, are

Which of the following is true of high and variable rates of inflation?

Which of the following will most likely occur during the expansionary phase of a business cycle?

Which of the following is a danger of inflation?

If the consumer price index (CPI) was 125 at year-end of 2008 and 132.5 at year-end 2009, inflation during 2009 was

At the beginning of a year, decision makers expect the general level of prices to increase at a 6 percent annual rate. The CPI increases from 150 to 154.5 during the year; this indicates that

Sophia is tending to her home garden while awaiting recall from her seasonal part-time job. The Bureau of Labor Statistics would classify Sophia as

The natural rate of unemployment

Which of the following is true?

Which of the following is a danger of high rates of inflation?