Deck 18: Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Question 1

Each person in the population can be classified as employed or unemployed.

Answer 1

False

Question 2

Luke has lent his friend Mitch some money.However he underestimated the rate of inflation when they agreed to a repayment and interest schedule.Mitch will benefit from the inflation.

Answer 2

True

Question 3

The Employment Act of 1946 dictated the U.S.goal of maintaining high employment through high economic growth but did not specify any goals with regard to the price level.

Answer 3

False

Question 4

The cost of unemployment to society includes loss of the goods and services that might have been produced if the unemployed had been employed.

Question 5

Unemployment rises and falls in the same direction as output over the business cycle.

Question 6

The real interest rate is calculated by subtracting inflation from the nominal interest rate.

Question 7

Each person in the population can be classified as employed,unemployed,or not in the labor force.

Question 8

Frictional unemployment is the temporary unemployment that results from the search time that occurs when people are searching for suitable jobs and firms are looking for suitable workers.

Question 9

Economists consider cyclical unemployment to be the byproduct of a healthy economy.

Question 10

Unanticipated inflation will benefit creditors at the expense of debtors.

Question 11

Nearly every society desires to achieve the macroeconomic goals of high employment,a stable price level,and high economic growth.

Question 12

Roughly 60 percent of women participate in the labor force today.

Question 13

If,over time,a greater proportion of the labor force is comprised of middle-aged individuals,one would expect the natural rate of unemployment to rise.

Question 14

The unemployment rate measures the number of unemployed people expressed as a percentage of the total population.

Question 15

The natural rate of unemployment can change over time as technological,demographic,institutional,and other conditions vary.

Question 16

Cyclical unemployment rises and falls with fluctuations in the macroeconomy.

Question 17

Unexpected inflation harms both debtors and individuals who live on fixed incomes.

Question 18

Economists refer to the "typical" rate of unemployment as the natural rate of unemployment.

Question 19

New inventions may displace some workers,but generally lead to the growth of jobs in new industries.

Question 20

Another name for the contractionary phase of a business cycle is recession.

Question 21

Economists believe that the Consumer Price Index tends to overstate the actual rate of inflation.

Question 22

Exhibit 18-1 Refer to Exhibit 18-1.From the data provided,the labor force participation rate is approximately ____ percent.

A) 69.6
B) 64.3
C) 92.3
D) 5.4

Question 23

Real gross domestic product is the total value of all:

A) goods and services adjusted for inflation.
B) goods and services without an adjustment for inflation.
C) final goods and services adjusted for inflation.
D) final goods and services without adjustment for inflation.

Question 24

Which piece of legislation committed the government to pursuing unemployment policies that are consistent with maintaining price stability?

A) The Effective Pricing Act of 1971
B) The Employment Initiative Act of 1998
C) The Employment Act of 1946
D) The Stable Growth Act of 1960

Question 25

The NBER determined that the U.S.economy experienced a recession that officially began in December 2007 and ended in June of 2009.

Question 26

The unemployment rate measures:

A) unemployed workers as a percentage of the population.
B) unemployed workers as a percentage of the population over the age of sixteen.
C) unemployed workers as a percentage of the labor force.
D) the number of people unemployed divided by the number of people employed.

Question 27

The unemployment rate is defined as:

A) unemployed workers plus discouraged workers, divided by the total population over the age of sixteen.
B) part-time workers plus full-time workers, divided by the total population over the age of sixteen.
C) the percentage of the labor force that is unemployed.
D) the percentage of the population over the age of sixteen that is unemployed.

Question 28

Exhibit 18-1 Refer to Exhibit 18-1.The number of people considered to be out of the labor force is:

A) 100 million.
B) 60 million.
C) 85 million.
D) 180 million.

Question 29

The CPI measures the average level of prices of all final goods and services produced in the economy.

Question 30

The official unemployment rate may not reflect the true state of unemployment because:

A) part-time employees who want to work more hours are treated the same statistically as those who hold full-time jobs.
B) some individuals who want to work may become discouraged and cease actively looking for work.
C) workers laid off from their jobs and looking for new ones are not counted among the unemployed.
D) of (a) and (b) only.

Question 31

Exhibit 18-1 Refer to Exhibit 18-1.According to the data provided,____ people constitute the labor force.

A) 100 million
B) 195 million
C) 85 million
D) 180 million

Question 32

The total labor force equals:

A) the number of officially employed persons.
B) the number of officially unemployed persons.
C) the number of officially employed plus unemployed persons.
D) the number of persons aged sixteen and over in the population.

Question 33

Exhibit 18-1 Refer to Exhibit 18-1.From the data provided,the unemployment rate is approximately ____ percent.

A) 4.5
B) 7.7
C) 9.2
D) 5.4

Question 34

A major macroeconomic goal of nearly every society is:

A) maintaining stability of prices.
B) maintaining high levels of employment.
C) achieving high rates of economic growth.
D) all of the above.

Question 35

The first formal acknowledgement of the primary macroeconomic goals of price stability,high employment,and promoting economic growth in the United States came with passage of the:

A) Federal Reserve Act of 1913.
B) the Sherman Antitrust Act of 1890.
C) the Social Security Act of 1935.
D) the Employment Act of 1946.

Question 36

The total labor force consists of:

A) the entire population.
B) the population over the age of sixteen.
C) the number of officially employed persons.
D) the number of officially employed persons plus the number of officially unemployed persons.

Question 37

The construction of a price index is complicated by several factors,including changes in the quality of goods and services over time,the introduction of new products,and the disappearance of old,outmoded products.

Question 38

The unemployment rate is the number of people classified as unemployed as a percentage of:

A) the entire population.
B) the population over the age of sixteen.
C) the labor force.
D) the number of people over the age of sixteen who are employed.

Question 39

High rates of unemployment are undesirable because:

A) they cause increased levels of societal tension.
B) society loses potential production of goods and services.
C) families of the unemployed may find it difficult to survive.
D) of all of the above.

Question 40

The economy reaches full employment when the unemployment rate equals zero.

Question 41

Kathryn chooses to go to college full-time rather than to work.Kathryn:

A) is not part of the labor force.
B) is part of the labor force and what economists call a discouraged worker.
C) is part of the labor force, but not actively seeking work.
D) is considered employed.

Question 42

If the number of employed persons in a country equals 24 million,the number of unemployed persons equals 8 million,and the number of persons over age 16 in the population equals 40 million,the unemployment rate equals:

A) 8 percent.
B) 20 percent.
C) 25 percent.
D) 32 percent.

Question 43

A person who works part-time is considered to be:

A) employed.
B) unemployed.
C) out of the labor force.
D) overemployed.

Question 44

The unemployment rate may underestimate the true extent of unemployment if:

A) many part-time employees would like to work full-time, but are unable to get the additional work.
B) employees increase the number of hours they work overtime.
C) there are a large number of people working in the underground economy.
D) any of the above occur.

Question 45

Bill looked for work for six months but could not find a job to his liking.He now spends his time at the beach.For purposes of employment he is considered:

A) out of the labor force.
B) unemployed.
C) employed in the underground economy.
D) underemployed.

Question 46

A discouraged worker is:

A) one who opts to quit work to attend college.
B) one who opts to quit searching for work after unsuccessfully seeking employment.
C) a part-time worker who would like to work more hours.
D) none of the above.

Question 47

If there are discouraged workers:

A) they are included in the official count of the unemployed.
B) the unemployment rate will tend to overstate the true level of unemployment.
C) the unemployment rate will tend to understate the true level of unemployment.
D) they are considered part of the labor force.

Question 48

If a large number of individuals file unemployment claims while working in the underground economy:

A) the unemployment rate overstates the level of unemployment.
B) the unemployment rate understates the level of unemployment.
C) the accuracy of the unemployment rate is not affected.
D) discouraged worker statistics will underestimate the true state of frustration by job seekers.

Question 49

Which of the following individuals are considered officially unemployed?

A) a discouraged worker
B) an individual who quits his job to raise a child
C) an individual who is not looking for a job because he works in the underground economy
D) None of the above

Question 50

If the unemployment rate is 8 percent,this means:

A) 8 percent of the population is unemployed.
B) 8 percent of the population over age 16 is unemployed.
C) 8 percent of the labor force is unemployed.
D) the number of unemployed persons equals 8 percent of the employed persons.

Question 51

The most significant real economic cost of high unemployment is:

A) the money cost of unemployment insurance payments to the unemployed.
B) the lost tax revenue that might have been paid by persons if they had worked.
C) the difference in income between a person's lost job and new job.
D) the potential goods and services that might have been produced but weren't.

Question 52

The unemployment rate is calculated as:

A) the number of officially unemployed persons divided by the number of officially employed persons.
B) the number of officially employed persons divided by the number of officially unemployed persons.
C) the number of officially unemployed persons divided by the number of officially employed plus unemployed persons.
D) the number of officially unemployed persons divided by the population.

Question 53

In November 1995 the labor force in Aberdeen,South Dakota,was 14,800.There were 14,483 persons employed.The local unemployment rate:

A) was 1.2 percent.
B) was 2.1 percent.
C) was 5.6 percent.
D) was 7.1 percent.

Question 54

If the number of employed persons equals 180 million,the number of unemployed persons equals 15 million,and the number of persons over age 16 in the population equals 210 million,the unemployment rate equals ____ and the labor force participation rate equals ____.

A) 7.1%; 85.7%
B) 7.7%; 85.7%
C) 7.1%; 92.9%
D) 7.7%; 92.9%

Question 55

Persons who do not hold a job,but are actively seeking work are considered:

A) out of the labor force.
B) unemployed.
C) unemployable, and not counted in official statistics.
D) underemployed.

Question 56

If the numbers of employed and unemployed do not change but the size of the population increases by 10%,what would be the effect?

A) an increase in the unemployment rate and an increase in the labor force participation rate
B) an increase in the unemployment rate and no change in the labor force participation rate
C) an increase in the unemployment rate and a decrease in the labor force participation rate
D) no change in the unemployment rate and a decrease in the labor force participation rate

Question 57

The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals:

A) 11 percent.
B) 14.4 percent.
C) 16.8 percent.
D) 18.2 percent.

Question 58

Persons who do not hold a job and are not actively seeking work are considered:

A) out of the labor force.
B) unemployable, and not counted in official statistics.
C) underemployed.
D) unemployed.

Question 59

The unemployment rate may overestimate the true extent of unemployment if:

A) many part-time employees would like to work full-time, but are unable to get the additional work.
B) many people become discouraged and cease looking for work.
C) people falsely claim that they are actively seeking work in order to receive unemployment benefits.
D) all of the above

Question 60

A person who works 25 hours per week:

A) is considered to be a discouraged worker.
B) is considered to be unemployed.
C) is considered to part of the labor force.
D) none of the above

Question 61

Billy loses his job as a road construction worker and cannot find another position with equivalent pay and benefits.As a result,he is still checking the want ads and reporting to the unemployment office on a weekly basis.He is considered to be:

A) unemployed.
B) out of the labor force.
C) underemployed.
D) lazy.

Question 62

A healthy economy would be characterized by a relatively ____ unemployment rate and a relatively ____ labor force participation rate.

A) low; low
B) low; high
C) high; low
D) high; high

Question 63

Which of the following categories account for the smallest fraction of unemployed workers?

A) Job leavers
B) Job losers
C) Reentrants
D) New entrants

Question 64

Which of the following groups of people would be included in the official unemployment rate?

A) part-time workers
B) workers temporarily laid off from jobs to which they expect to return
C) discouraged workers
D) all of the above

Question 65

Hometown,USA,has a labor force of 78,567 persons and employment of 74,382.The unemployment rate for the city is:

A) 5.3 percent.
B) 5.6 percent.
C) 6.0 percent.
D) none of the above.

Question 66

A discouraged worker is someone who:

A) has a job, but wants to get a different one.
B) is unemployed and looking for work.
C) quits a job and is unable to collect unemployment compensation.
D) gives up looking for work, and is no longer counted as unemployed.

Question 67

Which of the following statements is incorrect?

A) Job losers typically account for 50 to 60 percent of the unemployed.
B) Unemployment rates in the United States during the Great Depression exceeded 50 percent.
C) The labor force participation rate is the percentage of the non-institutional population over age 16 that is in the labor force.
D) The increase in the labor force participation rate since 1950 can be partly attributed to the entry of baby boomers into the labor force.

Question 68

Structural unemployment includes:

A) unemployment caused by workers who leave positions to seek better jobs.
B) unemployment caused by automation that displaces workers from their jobs.
C) unemployment caused by a decline in the economy's total production.
D) unemployment caused by the geographical and occupational mobility of the labor force.

Question 69

Persons who do not have jobs and who do not look for work are considered:

A) unemployed.
B) out of the labor force.
C) underemployed.
D) overemployed.

Question 70

____ experience lower rates of unemployment than do ____.

A) High school graduates; college graduates
B) College graduates; high school graduates
C) Adult females; adult males
D) Black males; white males

Question 71

Which of the following individuals would be considered unemployed?

A) a lawyer temporarily working as an assistant in a law firm
B) a computer technician who has not worked for 10 months and gave up looking 4 months ago
C) a full time student who feel that he is taking too many classes to work
D) none of the above

Question 72

A college student who is enrolled in school full-time and not seeking employment is considered:

A) out of the labor force.
B) unemployable, and not counted in official statistics.
C) employed in leisure.
D) underemployed.

Question 73

Since 1950,there has been ____ in the labor force participation rate.

A) no change
B) an increase
C) a decrease
D) first an increase and then a significant decrease

Question 74

Job losers typically account for ____ of the unemployed.

A) 80 to 90 percent
B) 50 to 60 percent
C) 30 to 40 percent
D) 10 to 20 percent

Question 75

____ experience higher rates of unemployment than do ____.

A) Teenagers; adults
B) Adult males; adult females
C) Skilled workers; unskilled workers
D) White males; Hispanic males

Question 76

Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking.What would happen to the unemployment rate?

A) It would increase.
B) It would fall.
C) It would change, but the effect cannot be predicted.
D) It would not change.

Question 77

Discouraged workers are defined as those:

A) whose productivity is low because working in dead-end jobs reduces their morale.
B) who are counted as frictionally unemployed, having become dissatisfied with their previous jobs.
C) who are counted as structurally unemployed, lacking training for the skilled positions for which they are applying.
D) who have given up looking for a job and are not counted as unemployed.

Question 78

____ experience lower rates of unemployment than do ____.

A) Teenagers; adults
B) Adult females; adult males
C) Skilled workers; unskilled workers
D) Black females; white females

Question 79

A city in which 320,000 persons are employed has a labor force of 359,500 persons.The unemployment rate for the city is:

A) 7.8 percent.
B) 11.0 percent.
C) 12.3 percent.
D) 14.5 percent.

Question 80

If the population older than 16 years of age equals 150 million,the labor force equals 110 million,and the total number of persons employed equals 98 million,then the unemployment rate is:

A) 8 percent.
B) 38 percent.
C) 10.9 percent.
D) 28 percent.