Question 1

An increase in the price of goods bought by firms and the government will show up in:
A)the CPI but not in the GDP deflator.
B)the GDP deflator but not in the CPI.
C)both the CPI and the GDP deflator.
D)neither the CPI nor the GDP deflator.

Accepted Answer

The GDP deflator is a measure of the price level of all domestically produced final goods and services, while the CPI measures the price level of a basket of goods and services typically consumed by urban households. Therefore, an increase in the price of goods bought by firms and the government will show up in the GDP deflator but not in the CPI.

Question 2

Assume that the market basket of goods and services purchased in 2004 by the average family in the United States costs $14,000 in 2004 prices, whereas the same basket costs $21,000 in 2009 prices. However, the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices, whereas this same basket would have cost $15,000 in 2004 prices. Given this data, a Laspeyres price index of 2009 prices using 2004 as the base year would be:
A)1.05.
B)approximately 1.07.
C)approximately 1.33.
D)1.50.

Accepted Answer

The Laspeyres price index is calculated by taking the cost of the base year basket at current year prices divided by the cost of the base year basket at base year prices. Here, it is $21,000 (2009 prices) / $14,000 (2004 prices) = 1.50.

Question 3

According to the definition used by the U.S. Bureau of Labor Statistics, a person is not in the labor force if that person:
A)is going to school full time.
B)is temporarily absent from a job because of illness.
C)has been temporarily laid off.
D)is out of a job and looking for work during the previous four weeks.

Accepted Answer

According to the Bureau of Labor Statistics, individuals who are going to school full time are not considered part of the labor force.

Question 4

The CPI is determined by computing:
A)an average of prices of all goods and services.
B)the price of a basket of goods and services that changes every year, relative to the same basket in a base year.
C)the price of a fixed basket of goods and services, relative to the price of the same basket in a base year.
D)nominal GDP relative to real GDP.

Accepted Answer

The CPI is a measure of the average prices of a fixed basket of goods and services, relative to the prices of the same basket in a base year. It is calculated by selecting a base year and a basket of goods and services that represents the typical purchases of consumers. Then, the prices of these goods and services are collected over time and compared to the prices in the base year. The percentage change in the prices of the basket is the percentage change in the CPI.

Question 5

If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately percent.
A)3.5
B)4.7
C)4.9
D)7

Accepted Answer

The answer of If 7 million workers are unemployed, 143...

Question 6

The number of households interviewed in the monthly employment survey of the U.S. Bureau of Labor Statistics is approximately:
A)6,000.
B)60,000.
C)600,000.
D)6 million.

Accepted Answer

According to the U.S. Bureau of Labor Statistics website, the Current Population Survey (which is the monthly employment survey) is based on a sample of approximately 60,000 households.

Question 7

Assume that the adult population of the United States is 191.6 million, total employment is 117.6 million, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately percent.
A)4.9
B)7.4
C)7.9
D)9.4

Accepted Answer

The unemployment rate is calculated as the number of unemployed divided by the labor force (employed + unemployed), then multiplied by 100. Here, the labor force is 117.6 million + 9.4 million = 127 million. The unemployment rate is (9.4 million / 127 million) * 100 ≈ 7.4%.

Question 8

An increase in the price of imported goods will show up in:
A)the CPI but not in the GDP deflator.
B)the GDP deflator but not in the CPI.
C)both the CPI and the GDP deflator.
D)neither the CPI nor the GDP deflator.

Accepted Answer

The answer of An increase in the price of imported...

Question 9

The core inflation rate:
A)measures the change in producer prices.
B)is measured using a Paasche index.
C)excludes food and energy prices.
D)includes the price of exports and includes the price of imports.

Accepted Answer

The core inflation rate excludes food and energy prices.

Question 10

The CPI is a:
A)Laspeyres price index.
B)Paasche price index.
C)Laspeyres quantity index.
D)Paasche quantity index.

Accepted Answer

The CPI is a Laspeyres price index, which measures the change in the price of a fixed basket of goods and services commonly consumed by households over time. It uses a fixed base year to establish the quantities of each item in the basket and their corresponding prices. The Laspeyres index assumes that consumers will continue to purchase the same quantities of goods and services as in the base year, even if their prices change.

Question 11

If the unemployment rate is 6 percent and the number of employed is 188 million, then the labor force equals million.
A)11.28
B)176.72
C)188
D)200

Accepted Answer

The labor force includes both employed and unemployed individuals. If the unemployment rate is 6%, then 6% of the labor force is unemployed. Let L be the labor force. Then, 0.06L is the number of unemployed, and L - 0.06L = 188 million (employed). Solving for L gives L = 200 million.

Question 12

When prices of different goods are increasing by different amounts, the price index that will rise the fastest is:
A)Fisher's ideal index.
B)the CPI.
C)the GDP deflator.
D)a Paasche index.

Accepted Answer

The CPI, or Consumer Price Index, tends to rise the fastest among the options given when prices of different goods are increasing by different amounts. This is because the CPI is based on a fixed basket of goods and services, making it more sensitive to price changes in those specific items compared to indices like the GDP deflator, which reflects prices for all domestically produced goods and services, or the Paasche and Fisher indices, which adjust the basket over time or use a hybrid approach, respectively.

Question 13

The panel of economists appointed by the Senate Finance Committee estimated that the CPI inflation by approximately percentage point(s) per year.
A)overestimates; 1
B)overestimates; 10
C)underestimates; 1
D)underestimates; 10

Accepted Answer

The Consumer Price Index (CPI) is often criticized for overestimating inflation, typically by a small margin such as 1 percentage point per year, rather than underestimating it or by a large margin like 10 percentage points.

Question 14

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $0.50 in 2009. If 10 apples and 5 oranges were purchased in 2002, and 5 apples and 10 oranges were purchased in 2009, the CPI for 2009, using 2002 as the base year, is:
A)0.75.
B)0.80.
C)1.
D)1.25.

Accepted Answer

To calculate the CPI, we first need to find the cost of the basket of goods (10 apples and 5 oranges) in both 2002 and 2009.
In 2002, the cost of the basket was: 
(10 * $0.50) + (5 * $1) = $5.00

In 2009, the cost of the basket was:
(5 * $1) + (10 * $0.50) = $7.50

Now, using 2002 as the base year, we can calculate the CPI:
CPI = (Cost of basket in current year / Cost of basket in base year) * 100
CPI = ($7.50 / $5.00) * 100
CPI = 150

Therefore, the CPI for 2009 using 2002 as the base year is 1.5 or 150%, meaning that prices have increased by 50% since 2002. To convert this to a decimal, we divide by 100, giving us a final answer of 1.5. However, none of the given answer choices match this result, so the closest option is D) 1.25, which is the result we would get if we calculated the CPI using 2009 as the base year (which is not what the question is asking for).

Question 15

Assume that the market basket of goods and services purchased in 2004 by the average family in the United States costs $14,000 in 2004 prices, whereas the same basket costs $21,000 in 2009 prices. However, the basket of goods and services actually purchased by the average family in 2009 costs $20,000 in 2009 prices, whereas this same basket would have cost $15,000 in 2004 prices. Given these data, a Paasche index for 2009 using 2004 prices would be:
A) 1.05.
B)approximately 1.07.
C)approximately 1.33.
D)1.50.

Accepted Answer

The Paasche index is calculated as the cost of the current year basket at current year prices divided by the cost of the current year basket at base year prices. Thus, it is $20,000 (2009 prices) / $15,000 (2004 prices) = 1.3333, which is approximately 1.07 when rounded.

Question 16

Unlike the GDP deflator, the CPI includes the prices of:
A)goods purchased by firms.
B)goods purchased by governments.
C)exported goods.
D)imported goods.

Accepted Answer

The CPI includes the prices of domestically produced and imported goods purchased by households. It does not include goods purchased by firms or governments, or exported goods. Therefore, option D is the correct choice.

Question 17

Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation,
A)provides a real, rather than a nominal, rate of inflation.
B)gives a better measure of ongoing, sustained price changes.
C)is more consistent with measures of inflation used in other countries.
D)fluctuates more than measures of inflation that include food and energy prices.

Accepted Answer

Excluding food and energy prices from the market basket gives a better measure of ongoing, sustained price changes because food and energy prices are known to be more volatile and subject to short-term fluctuations. By excluding them, analysts can get a clearer picture of underlying inflationary trends.

Question 18

The labor-force participation rate is the percentage of the:
A)adult population that is employed.
B)adult population that is in the labor force.
C)labor force that is employed.
D)labor force that is unemployed.

Accepted Answer

The labor-force participation rate is defined as the percentage of the adult population that is in the labor force, which includes both employed and unemployed individuals who are actively seeking work. Therefore, choice B is the correct answer. Choices A, C, and D all describe subsets of the labor force or employed population, but not the labor-force participation rate.

Question 19

The labor force equals the:
A)adult population.
B)number of employed individuals.
C)number of unemployed individuals.
D)number of employed and unemployed individuals.

Accepted Answer

The labor force includes both employed and unemployed individuals. Therefore, option D, "number of employed and unemployed individuals," is the correct answer. Option A is incorrect because the adult population includes those who are not in the labor force, such as retirees or stay-at-home parents. Option B is incorrect because it only includes those who are currently employed, leaving out those who are seeking employment. Option C is incorrect because it only includes those who are currently unemployed, leaving out those who are employed.

Question 20

According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they:
A)are out of a job, but not looking for work.
B)retired from the labor force before age 65.
C)do not have a job, but have looked for work in the past 4 weeks.
D)are absent from work because of bad weather or illness.

Accepted Answer

According to the definition used by the U.S. Bureau of Labor Statistics, individuals are considered unemployed if they do not have a job, but have actively looked for work in the past four weeks. Options A and B describe individuals who are not considered part of the labor force, and option D describes individuals who are temporarily absent from work but still considered employed.

Quiz 2: The Data of Macroeconomics

An increase in the price of goods bought by firms and the government will show up in:

According to the definition used by the U.S. Bureau of Labor Statistics, a person is not in the labor force if that person:

The CPI is determined by computing:

If 7 million workers are unemployed, 143 million workers are employed, and the adult population equals 200 million, then the unemployment rate equals approximately percent.

The number of households interviewed in the monthly employment survey of the U.S. Bureau of Labor Statistics is approximately:

Assume that the adult population of the United States is 191.6 million, total employment is 117.6 million, and 9.4 million are unemployed. Then the unemployment rate, as normally computed, is approximately percent.

An increase in the price of imported goods will show up in:

The core inflation rate:

The CPI is a:

If the unemployment rate is 6 percent and the number of employed is 188 million, then the labor force equals million.

When prices of different goods are increasing by different amounts, the price index that will rise the fastest is:

The panel of economists appointed by the Senate Finance Committee estimated that the CPI inflation by approximately percentage point(s) per year.

Assume that apples cost $0.50 in 2002 and $1 in 2009, whereas oranges cost $1 in 2002 and $0.50 in 2009. If 10 apples and 5 oranges were purchased in 2002, and 5 apples and 10 oranges were purchased in 2009, the CPI for 2009, using 2002 as the base year, is:

Unlike the GDP deflator, the CPI includes the prices of:

Measuring the rate of inflation using a market basket that excludes food and energy prices is preferred by some analysts because this measure, called core inflation,

The labor-force participation rate is the percentage of the:

The labor force equals the:

According to the definition used by the U.S. Bureau of Labor Statistics, people are considered to be unemployed if they: