Deck 19: Monitoring Jobs and Inflation

Question 1

If the number of people unemployed is 100, the number of people employed is 1000, and the working- age population is 1400, then the labour force participation rate is

A)66.6 per cent.
B)64.3 per cent.
C)78.6 per cent.
D)71.4 per cent.

Answer 1

C

Question 2

If the basket of goods and services used to calculate the CPI cost $200 in the reference base period and $450 in a later year, the CPI for the latter year equals

A)325.
B)200.
C)450.
D)225.

Answer 2

D

Question 3

The natural unemployment rate

A)has been estimated to range between 4 per cent and 6 per cent in Australia in recent years.
B)occurs when 100 per cent of the labour force is employed.
C)is attained whenever the unemployment rate is less than 5 per cent, because 95 per cent employment is considered full employment.
D)is estimated to be close to 9 per cent in recent years in Australia.

Answer 3

A

Question 4

Cyclical unemployment

A)occurs when technology improvements change job requirements.
B)may increase or decrease during an expansion.
C)is due mainly to job leavers.
D)fluctuates over the business cycle.

Question 5

The BEST example of a frictionally unemployed individual is

A)Charles, who has lost his job as an autoworker because of increased imports and can't find a good job that utilises his skills.
B)Sam, who lost his job as a real estate salesperson when the housing market went soft because of a recession.
C)Mary, who quit her job to find work closer to her home.
D)Sandy, who has few skills and is no longer looking for work.

Question 6

Which of the following situations BEST describes an individual who is cyclically unemployed?

A)Catherine is a ski instructor who is not working because it is summer.
B)Nicholas was laid- off when orders for Holden cars fell during a recession.
C)Susan quit her job as a preschool teacher to try to find a better paying job.
D)Matthew was an artillery man, but he has been unable to find work since he left the army.

Question 7

Unemployment caused by the normal labour turnover is called unemployment.

A)cyclical
B)part- time
C)involuntary
D)frictional

Question 8

A major characteristic of structural unemployment that differentiates it from frictional unemployment is that structural unemployment

A)usually lasts longer than frictional unemployment.
B)exists in an expansion whereas there is no frictional unemployment in an expansion.
C)exists only during a recession.
D)is a short- term problem.

Question 9

How would you BEST describe a manufacturing employee who has been fired because he was replaced by a robot (new technology)and does not have the skills necessary to help operate the robot?

A)Job leaver
B)Structurally unemployed
C)Entrant/reentrant
D)Cyclically unemployed

Question 10

The labour force is the sum of the

A)number of employed people and the working- age population.
B)total population and the number of unemployed people.
C)working- age population and the number of unemployed people.
D)number of employed people and the number of unemployed people.

Question 11

A recession causes a decrease in the demand for housing, resulting in substantial layoffs in the construction industry. The people laid off are considered

A)frictionally unemployed.
B)structurally unemployed.
C)seasonally unemployed.
D)cyclically unemployed.

Question 12

Hyperinflation is defined as

A)very low inflation rates.
B)declining inflation rates.
C)very high inflation rates.
D)rising but low inflation rates.

Question 13

Suppose that the price level was 100 in 2008, 110 in 2009, and 130 in 2010. Over these three years,

A)deflation occurred at an accelerating rate.
B)the inflation rate was positive but slowing.
C)the inflation rate was positive and accelerating.
D)prices were stable.

Question 14

If the price levels for the last three months have been 112, 125 and 126, we would say

A)inflation was less rapid between the first and second month than between the second and third month.
B)inflation has been constant over the three months.
C)inflation was more rapid between the first and second month than between the second and third month.
D)inflation has steadily increased over the three months.

Question 15

The labour force is defined as the number of people who

A)are available and looking for work but are unable to find employment.
B)would like to have a full- time job but are working part- time.
C)are employed plus the number of people who are unemployed.
D)would like to have a job but have stopped seeking work.

Question 16

Suppose the number of people employed is 25 million and the number of people in the labour force is 75 million. What is the employment- to- population ratio?

A)75 per cent
B)33 per cent
C)25 per cent
D)There is not enough information given to answer the question.

Question 17

If this year's price level is 126 and last year's price level was 120, the inflation rate is .

A)1.05 per cent a year
B)5 per cent a year
C)6 per cent a year
D)0.95 per cent a year

Question 18

Which of the following most likely would decrease frictional unemployment?

A)An increase in the number of high school and college graduates.
B)An expansion of unemployment compensation benefits.
C)Effective Internet- based employment services and job registries.
D)All of the above would decrease frictional unemployment.

Question 19

Cyclical unemployment occurs when

A)a business cycle recession decreases employment.
B)individuals enter the labour market making the rounds of potential employers.
C)individuals with skills no longer valued in the labour market cannot find employment.
D)individuals give up the search for employment.

Question 20

An unemployment rate of zero per cent cannot be expected because

A)there are some people who do not want to work.
B)some portion of the labour force will always be between jobs.
C)cyclical unemployment will always exist.
D)there will always be discouraged workers.

Question 21

Unemployment that is the result of recessions is called

A)frictional unemployment.
B)downtime unemployment.
C)cyclical unemployment.
D)structural unemployment.

Question 22

The labour force participation rate is percentage of who are in the labour force.

A)employed people
B)people under age 65
C)the working- age population
D)the population

Question 23

When an individual who has not been working but has been looking for work decides to terminate the search process, the official unemployment rate

A)will remain unchanged.
B)will fall.
C)will rise.
D)may fall or rise depending on whether or not the individual resumes his education.

Question 24

Comparing the core inflation rate to the Consumer Price Index, the core inflation rate

A)excludes the volatile elements of the CPI.
B)controls for the biases of the CPI.
C)uses current period quantities, not base period quantities.
D)measures all goods produced, not just consumer goods.

Question 25

When an individual is frictionally unemployed, the unemployment arises in part from

A)a short- term elimination of jobs because of a slowdown in business activity.
B)a reduction in the overall demand for workers' skills.
C)the permanent elimination of jobs because of a change in the structure of the economy.
D)individuals searching for appropriate employment.

Question 26

When a worker quits a job to look for a better job,

A)structural unemployment decreases.
B)structural and cyclical unemployment increase.
C)frictional unemployment increases.
D)cyclical unemployment increases.

Question 27

Looking at inflation rates in Australia since the 1970s we see that

A)the 1970s experienced the highest inflation rates.
B)inflation fell the most during the 1970s productivity slowdown.
C)the inflation rate increased with the increased growth of the 1990s.
D)the highest inflation rates were the double digits during the 1990s.

Question 28

Which of the following means that the CPI overstates the actual inflation rate?

A)Quality change bias
B)New goods bias
C)Outlet substitution bias
D)All of the above cause the CPI to overstate inflation.

Question 29

When economists speak of full employment, they refer to the case in which the sum of frictional and structural unemployment is

A)equal to zero.
B)equal to the actual amount of unemployment.
C)greater than the level of deficient demand unemployment.
D)falling over time.

Question 30

An individual who has stopped looking for a job but has looked in the past and still wants a job is referred to as

A)a marginally attached worker.
B)an unemployed worker.
C)a productive worker.
D)a contingent worker.

Question 31

Last year's price level was 120 and since then there has been a 5 per cent inflation. This year's price level is

A)126.
B)130.
C)125.
D)None of the above

Question 32

When cyclical unemployment increases and other things remain the same, .

A)the amount of frictional unemployment increases
B)the natural unemployment rate does not change
C)the natural unemployment rate increases
D)the amount of structural unemployment decreases

Question 33

The labour force participation rate is calculated as the

A)labour force divided by the number of persons employed then multiplied by 100.
B)labour force divided by the working- age population then multiplied by 100.
C)number of persons unemployed divided by the labour force then multiplied by 100.
D)labour force divided by the unemployment rate then multiplied by 100.

Question 34

If the inflation rate is negative, the price level in an economy is

A)rising slowly.
B)rising rapidly.
C)constant.
D)falling.

Question 35

Structural unemployment is

A)associated with the general decline of specific industries.
B)almost always short- term in nature.
C)associated with the normal changing of jobs in a dynamic economy.
D)associated with general downturns in the economy.

Question 36

The biases in the CPI include the

A)new goods, quality change and substitution biases.
B)old goods, unemployment and inflation biases.
C)old goods, new goods and quality change biases.
D)substitution, new goods and old goods biases.

Question 37

Auto and steel workers commonly experience this type of unemployment in a recession.

A)Frictional unemployment
B)Structural unemployment
C)Natural unemployment
D)Cyclical unemployment

Question 38

The unemployment rate is the _ who are unemployed.

A)percentage of people in the labour force
B)percentage of the working- age population
C)number of people in the labour force
D)percentage of people in the country

Question 39

Bill is a high- school dropout who lost his job in a fast food restaurant when the economy plunged into a recession. After 8 months, Bill is still looking for work. He is an example of

A)frictional unemployment.
B)structural unemployment.
C)the natural unemployment rate
D)cyclical unemployment.

Question 40

Including marginally attached workers in the calculation of the unemployment rate would

A)not change the reported rate.
B)increase the reported unemployment rate.
C)change the reported rate, but in an unpredictable manner.
D)lower the reported rate.

Question 41

An individual is structurally unemployed if

A)the individual quits a job in order to search for a better one.
B)the individual wants to work just during certain months of the year.
C)the individual lacks marketable job skills because technology has changed.
D)there is a recession and the individual is laid off.

Question 42

Using the official measure of unemployment, which of the following people is considered unemployed?

A)A person who gave up looking for jobs because he or she was discouraged about his or her job prospects
B)A person who has been searching for work, but turns down a job paying a lower wage rate than desired
C)A part- time worker who wishes to work full time
D)A person who is working but expects to be laid off at the end of the month

Question 43

Suppose the economy is experiencing frictional unemployment of 1 per cent, structural unemployment of 3 per cent and cyclical unemployment of 4 per cent. What is the natural unemployment rate?

A)7 per cent
B)3 per cent
C)5 per cent
D)4 per cent

Question 44

Bob inherits a large sum of money from his dead uncle's estate. Bob decides to retire young, so he quits his job and heads to the Bahamas. Bob is an example of

A)cyclical unemployment.
B)frictional unemployment.
C)structural unemployment.
D)None of the above is correct.

Question 45

Which of the following pieces of information do you need to calculate the labour force participation rate?
I. The number of employed persons
II. The number of unemployed persons
III. The population
IV. The working- age population

A)I and II
B)I and III
C)I, II and III
D)I, II and IV

Question 46

Suppose there are 100 million people in the labour force, and 6 million unemployed people. During the next month, 200,000 people lose their jobs and 300,000 find jobs. The new total of employed persons is and the new unemployment rate is _.

A)94.1 million; 5.9 per cent
B)93.9 million; 6.1 per cent
C)100.1 million; 5.8 per cent
D)100 million; 6.1 per cent

Question 47

Frictional unemployment is

A)unemployment associated with the changing of jobs in a changing economy.
B)unemployment associated with declining industries.
C)long- term unemployment.
D)unemployment associated with business cycle recessions.

Question 48

The Consumer Price Index is a measure of the average of the prices paid by for a fixed basket of consumer goods and services.

A)all consumers
B)consumers living in cities with populations greater than 100,000
C)urban consumers
D)urban wage earners and clerical workers

Question 49

In an economy, 40 million people are employed, 2 million are unemployed, and 8 million are not in the labour force. What is the labour force participation rate?

A)80 per cent
B)87.5 per cent
C)83 per cent
D)84 per cent

Question 50

Structural unemployment is the result of

A)technological change or foreign competition.
B)a slowdown in the rate of economic expansion.
C)irresponsible workers with poor work habits.
D)normal labour market turnover.

Question 51

A recent accounting graduate from a major business school is searching for a place to begin his career as an accountant. This individual is BEST considered as

A)frictionally unemployed.
B)seasonally unemployed.
C)cyclically unemployed.
D)structurally unemployed.

Question 52

In a period of rapid, unexpected inflation, resources can be lost

A)because rapid inflation almost always turns into hyperinflation.
B)when firms use resources to forecast inflation.
C)when firms invest in research and development instead of forecasting inflation.
D)Both answers B and C are correct.

Question 53

The primary factor leading to cyclical unemployment is when

A)workers quit their jobs in order to look for higher paying employment.
B)some workers do not have marketable job skills.
C)businesses discriminate in their hiring practices on the basis of age, sex and race.
D)the level of overall economic activity fluctuates.

Question 54

When prices at KFC rise, more consumers buy their meals at McDonald's and fewer consumers buy their meals at KFC. This is an example of

A)commodity substitution.
B)consumers' action to boycott KFC.
C)outlet substitution.
D)both A and B.

Question 55

The first step in measuring the CPI is to

A)interview businesses.
B)conduct a monthly survey.
C)select the market basket.
D)collect prices for the basket of goods and services.

Question 56

The technique currently used to calculate the CPI implicitly assumes that over time consumers buy

A)relatively more of goods whose relative prices are rising.
B)goods and services whose quality improves at the rate of growth of real income.
C)the same relative quantities of goods as in a base year.
D)relatively less of goods whose relative prices are rising.

Question 57

The employment- to- population ratio equals

A)(labour force)/(working- age population)× 100.
B)(number of people with full- time jobs)/(labour force)× 100.
C)(number of people employed)/(labour force)× 100.
D)(number of people employed)/(working- age population)× 100.

Question 58

Which statement correctly describes "structural unemployment"?

A)Structural unemployment is also called "frictional unemployment."
B)Structural unemployment occurs even when the economy is at the natural unemployment rate.
C)The amount of structural unemployment depends on normal labour turnover.
D)Structural unemployment occurs mainly during recessions.

Question 59

Structural unemployment is

A)associated with the changing of jobs in a dynamic economy.
B)associated with changes in technology that change required job skills.
C)very short- term unemployment.
D)associated with general downturns in the economy.

Question 60

An example of the new goods bias in the CPI is the

A)switch from traditional car dealerships to low- cost Internet car buying services.
B)decreasing popularity of SUVs as the price of fuel has risen.
C)introduction of hybrid automobiles, vehicles that were not made until recently.
D)introduction of higher quality brakes as standard equipment on new cars.

Question 61

The natural unemployment rate

A)is equal to cyclical unemployment.
B)is the unemployment rate that occurs when the economy is at full employment.
C)fluctuates with the rate of inflation.
D)is a constant figure of about 4 per cent.

Question 62

Suppose the natural unemployment rate equals 6 per cent and the current unemployment rate is 8 per cent. We can conclude that

A)there is no structural unemployment.
B)full employment is not occurring.
C)there is no cyclical unemployment.
D)there is no frictional unemployment.

Question 63

Suppose the CPI last year is 121 and the CPI this year is 137. The correct method to calculate the inflation rate is

A)(137/121)× 100 = 113.2 per cent.
B)[(137 - 121)/121] × 100 = 13.2 per cent.
C)137 + 121 = 258.
D)(137 - 121)/100 = 16 per cent.

Question 64

If this year's price level exceeds last year's,

A)the inflation rate is accelerating.
B)no relative price changes are occurring.
C)the inflation rate between these years has been positive.
D)deflation is occurring.

Question 65

An individual who has stopped looking for a job because he is convinced that he cannot find a job is referred to as

A)a productive worker.
B)a discouraged worker.
C)an unemployed worker.
D)a contingent worker.

Question 66

Marginally attached workers fall into which of the following population categories?

A)Not in the labour force
B)Employed
C)Labour force
D)Unemployed

Question 67

Suppose the country of Tiny Town experienced frictional unemployment. This frictional unemployment would

A)signal that there are more job leavers than job losers.
B)be considered a natural occurrence in a growing economy.
C)signal that the number of discouraged workers is growing.
D)definitely signal that the country is in a recession.

Question 68

Because of the biases in calculating the CPI, actual inflation in the U.S. is

A)more than the measured inflation rate by about 1 per cent per year.
B)more than the measured inflation rate by about 1 per cent per month.
C)accurately measured.
D)less than the measured inflation rate by about 1 per cent per year.

Question 69

Full employment occurs when

A)frictional unemployment is zero.
B)structural unemployment is zero.
C)cyclical unemployment is zero.
D)cyclical and frictional unemployment are zero.

Question 70

During a recession, the .

A)employment- to- population ratio increases
B)number of marginally attached workers increases
C)number of discouraged workers decreases
D)unemployment rate decreases

Question 71

The consumer price index (CPI)

A)is the ratio of the average price of a typical basket of goods to the cost of producing those goods.
B)compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period 2.
C)compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period.
D)measures the increase in the prices of the goods included in GDP.

Question 72

Which type of unemployment increases during a recession?

A)Frictional unemployment
B)The natural unemployment rate
C)Cyclical unemployment
D)Structural unemployment

Question 73

If the labour force participation rate is rising and the working- age population is not changing, then the

A)number of unemployed people is rising and the size of the labour force is decreasing.
B)size of the labour force is increasing.
C)size of the labour force is decreasing.
D)number of unemployed people is falling and the size of the labour force is increasing.

Question 74

Structural unemployment

A)generally lasts longer than frictional unemployment.
B)falls as the pace of technological progress increases.
C)falls when the government provides more generous unemployment compensation benefits.
D)falls during the expansion phase of the business cycle.

Question 75

Full employment means that

A)there is no cyclical or frictional unemployment.
B)no one is unemployed.
C)there is no cyclical unemployment.
D)there is no structural or frictional unemployment.

Question 76

If the CPI was 132.5 at the end of last year and 140.2 at the end of this year, the inflation rate over these two years was

A)4.4 per cent.
B)7.7 per cent.
C)5.4 per cent.
D)5.8 per cent.

Question 77

The type of unemployment created by the normal rate of reentry and entry into the labour force is

A)cyclical unemployment.
B)structural unemployment.
C)frictional unemployment.
D)seasonal unemployment.

Question 78

Which of the following BEST fits the definition of unemployed?

A)Not working and not looking for work
B)Working less than 40 hours per week
C)Retired and not working
D)Not working but looking for a job

Question 79

When more labour is unemployed than the amount at the natural unemployment rate, then real GDP potential GDP.

A)cannot be compared to
B)is less than
C)is greater than
D)is equal to

Question 80

The BEST example of a cyclically unemployed individual is

A)Charles, who lost his job as a real estate salesperson when the housing market went soft because of a recession.
B)Alice, who quit her job to enter college.
C)Bob, who has just graduated from college and is entering the labour market.
D)Mary, who lost her job in the textile industry following a decrease in the tariff on textiles.