Deck 13: Unemployment and Inflation: Can We Find a Balance

Question 1

People who are in the process of changing jobs are classified in the category of

A)Frictional unemployment
B)Involuntary unemployment
C)Structural unemployment
D)Cyclical unemployment
E)Seasonal unemployment

Answer 1

A

Question 2

When individuals want to work,but give up looking for a job because they feel there will never be one available,they are considered

A)Pessimistic
B)Lazy
C)Discouraged
D)Part of the labor force
E)Unemployed

Answer 2

C

Question 3

A poorly educated,unskilled teenager currently unemployed is an example of

A)Frictional unemployment
B)Cyclical unemployment
C)Structural unemployment
D)Seasonal unemployment
E)None of the above

Answer 3

C

Question 4

A farmer who has lost his farm due to increased agricultural productivity is considered

A)Frictionally unemployed
B)Involuntarily unemployed
C)Structurally unemployed
D)Cyclically unemployed
E)Seasonally unemployed

Question 5

Which of the following individuals is part of the labor force?

A)A 15-year-old worker at a fast food restaurant
B)A paid prison worker at the prison carpentry shop
C)A college student attending school full-time
D)A stay-at-home dad
E)None of the above

Question 6

An auto factory worker who is unemployed because a robot now has his job is a victim of

A)Structural unemployment
B)Cyclical unemployment
C)Underemployment
D)Frictional unemployment
E)Seasonal unemployment

Question 7

A factory worker who loses a job because of a decrease in aggregate demand is

A)Frictionally unemployed
B)Involuntarily unemployed
C)Structurally unemployed
D)Cyclically unemployed
E)Seasonally unemployed

Question 8

The unemployment rate

A)For blacks is roughly twice the rate for whites
B)For women is lower than that of men
C)For teenagers is below the rate for the labor force as a whole
D)Is equal for males and females,blacks and whites,and young and old workers
E)Is none of the above

Question 9

The unemployment rate will not fall to zero because of

A)Cyclical unemployment
B)Frictional unemployment
C)Welfare
D)Voluntary unemployment
E)All of the above

Question 10

Which of the following individuals is considered part of the labor force?

A)An unemployed farmer
B)A college graduate looking for his first job
C)A retired teacher working as a sales clerk
D)A department store Santa during December
E)All of the above

Question 11

Technological change in an industry that historically required specific labor skills will lead to

A)Frictional unemployment
B)Structural unemployment
C)Cyclical unemployment
D)Seasonal unemployment
E)No changes in unemployment

Question 12

Unemployment rates tend to rise when

A)Inflation rates rise
B)Aggregate demand is high
C)The economy goes through an expansion
D)There is a recession
E)Interest rates are low

Question 13

Between 1960 and 2011,the unemployment rate has

A)Steadily increased
B)Steadily fallen
C)Been below 6% over the entire period
D)Ranged from 1% to 12%
E)None of the above

Question 14

A person is considered unemployed if the person is

A)Seeking a job requiring greater qualifications than the person possesses and no one is willing to hire the person for such a job
B)Offered a job for which the person is qualified but

Question 15

A college graduate looking for her first job is considered

A)Frictionally unemployed
B)Involuntarily unemployed
C)Structurally unemployed
D)Cyclically unemployed
E)Seasonally unemployed

Question 16

Which of the following people is considered unemployed?

A)A truck driver with a high school education who has been laid off his job and is now training to be a computer programmer
B)An individual who is currently not working nor actively seeking employment
C)A secretary who is currently not working and who seeks employment using secretarial skills
D)All of the above
E)None of the above

Question 17

Which of the following types of unemployment is considered long-term,hardcore unemployment?

A)Cyclical
B)Structural
C)Frictional
D)Seasonal
E)None of the above

Question 18

The full-employment unemployment rate is

A)0
B)Inconsistent with price stability
C)The rate that

Question 19

People who are unemployed due to a downturn in economic activity are classified in the category of

A)Frictional unemployment
B)Structural unemployment
C)Seasonal unemployment
D)Cyclical unemployment
E)Voluntary unemployment

Question 20

A major cause of involuntary unemployment is

A)A wage rate below equilibrium
B)Not enough demand for labor
C)Too much supply of labor
D)Laziness
E)A wage rate above equilibrium

Question 21

The highest unemployment rate is found among

A)People between the ages of 16 and 19
B)Females
C)Ethnic groups
D)The elderly
E)Children

Question 22

Suppose a family spends $20,000 on a basket of goods in 2011.Suppose the same basket costs $22,000 in 2012.Using 2011 as the base year,the price index for 2012 is

A)105
B)102
C)111
D)110
E)None of the above

Question 23

In the circular flow diagram,economic units are classified as

A)Imports and exports
B)Households and producers
C)Taxpayers and governments
D)Subsidy receivers and taxpayers
E)Producers and sellers

Question 24

Which of the following statements is correct? Inflation

A)Benefits creditors at the expense of debtors
B)Increases the purchasing power of the dollar
C)Increases the real value of savings
D)Arbitrarily "taxes" fixed income groups
E)Increases real wages

Question 25

If inflation causes the demand for houses to increase more rapidly than the demand for other goods,the economy has experienced which effect of inflation?

A)Equity
B)Efficiency
C)Output
D)Input
E)None of the above

Question 26

If inflation is not observable in the form of rising prices,it is called

A)Suppressed
B)Repressed
C)Deflation
D)Dynamic
E)None of the above

Question 27

Unemployment below the full employment rate is a measure of

A)Underemployment
B)Structural unemployment
C)Cyclical unemployment
D)Seasonal unemployment
E)None of the above

Question 28

Which of the following statements concerning the circular flow is FALSE?

A)The circular flow of economic activity shows how the overall economy operates
B)The circular flow emphasizes the independence of economic variables
C)There are two circular flows involved in the economy
D)The circular flow shows that real income is determined by physical goods and services produced in the economy
E)None of the above

Question 29

If the consumer price index is 100 in 2010 and is 120 in 2012,then the rate of inflation between 2010 and 2012 is

A)10%
B)20%
C)15%
D)5%
E)Unable to be calculated without further information

Question 30

When inflation redistributes income from one group in the economy to another,it is an example of which effect?

A)Equity
B)Efficiency
C)Output
D)Input
E)None of the above

Question 31

Which of the following is most likely be hurt by inflation?

A)People on fixed incomes
B)People whose wages rise faster than prices
C)Landholders
D)Borrowers
E)None of the above

Question 32

Which price index is also known as the cost-of-living index?

A)Consumer price index
B)Wholesale price index
C)Implicit price deflator
D)GDP deflator
E)All of the above

Question 33

If inflation stimulates production and employment,the economy experiences which of the following effects of inflation?

A)Equity
B)Efficiency
C)Output
D)Input
E)None of the above

Question 34

Federal income taxes are levied on the basis of nominally stated tax brackets,and there is a nominal upward adjustment in salaries and wages during inflation.Th

Question 35

When General Motors lays workers off because of a decrease in aggregate demand,it causes

A)Cyclical unemployment
B)Frictional unemployment
C)Seasonal unemployment
D)Structural unemployment
E)None of the above

Question 36

The best description of the growth of the money supply since 1960 is that it has

A)Increased steadily
B)Increased rapidly during the 1980's
C)Decreased steadily
D)Decreased rapidly during the 1960's
E)Shown patterns of both fast and slow growth over the decades

Question 37

The effect of inflation on production and employment is known as

A)An incomes policy
B)The equity effects of inflation
C)The efficiency effects of inflation
D)The output effects of inflation
E)Fiscal policy

Question 38

The circular flow of economic activity developed in the text is a model of the

A)Flow of goods,resources,payments and expenditures between the sectors of the economy
B)Influence of government on business behavior
C)Influence of business on consumers
D)Role of unions and government in the economy
E)Interaction among taxes,prices,and profits

Question 39

Price index numbers for a series of years show

A)If money GDP is growing
B)If real GDP is growing
C)If all prices are rising
D)The average price level for each year as a percentage of the base year
E)None of the above

Question 40

Which of the following best describes when the economy is experiencing inflation? When

A)The price of an essential good increases dramatically
B)The prices of many goods go up
C)There is a rise in the general level of prices
D)All prices remain the same or increase; no prices fall
E)The value of the dollar increases

Question 41

A trade deficit will occur in an economy

A)When spending exceeds income
B)When the value of exports exceeds the value of imports
C)When the value of exports is less than the value of imports
D)When an economy is expanding
E)When an economy is in recession

Question 42

Investment spending is sensitive to

A)Interest rates
B)Expectations by producers about the return on investment
C)The confidence of investors
D)All of the above
E)None of the above

Question 43

The Phillips curve depicts the relationship between

A)Output and inflation
B)Savings and investment
C)Unemployment and inflation
D)Imports and exports
E)None of the above

Question 44

Injections in the circular flow consist of

A)Savings,exports,and investments
B)Savings,exports,and taxes
C)Government spending,savings,and exports
D)Government spending,investment,and exports
E)None of the above

Question 45

To expand the level of economic activity,it is necessary that

A)Total leakages exceed total injections
B)Government expenditures exceed tax collections
C)Total injections exceed total leakages
D)Imports exceed exports
E)(c)and (d)above

Question 46

The aggregate demand curve will shift to the right

A)When the government raises taxes
B)If investors reduce their purchases of plant and equipment
C)If consumer confidence increases
D)If prices fall
E)None of the above

Question 47

The Following Questions Refer to the graph below. 57.Given short run aggregate supply S⁰,what level of aggregate demand is necessary for the economy to reach full employment?
A.Lower than D¹
B.D⁰
C.D¹
D.D²
E.Higher than D²
Which of the following would cause a shift from S¹ to S⁰?

A)A decrease in resource prices
B)An decrease in unemployment
C)An increase in the price of labor
D)An increase in consumption
E)All of the above

Question 48

Leakages in the circular flow consist of

A)Savings,taxes,and exports
B)Savings,investment,and exports
C)Government spending,investment,and exports
D)Savings,taxes,and imports
E)Investment,taxes,and imports

Question 49

Aggregate supply can be increased by

A)Reduced incentives to save
B)Higher taxes
C)Increases in government spending
D)Policies to induce more saving
E)None of the above

Question 50

The marginal propensity to consume is

A)Consumption divided by Income
B)The change in consumption
C)The change in consumption divided by the change in income
D)Unaffected by changes in income
E)All of the above

Question 51

The psychological law of consumption tells us the marginal propensity to consume will be

A)Less than 0
B)Greater than 0 but less than 1
C)Equal to 1
D)Greater than 1 but less than 10
E)Greater than 10

Question 52

Aggregate demand

A)Represents the sum of the demands by all purchasers of goods and services in an economy
B)Is comprised of the purchases of goods and services only by consumers
C)Excludes imports and exports
D)Assumes that governments do not purchase goods and services
E)None of the above

Question 53

The Following Questions Refer to the graph below. 57.Given short run aggregate supply S⁰,what level of aggregate demand is necessary for the economy to reach full employment?
A.Lower than D¹
B.D⁰
C.D¹
D.D²
E.Higher than D²
Which of the following would cause a shift from D¹ to D²?

A)An increase in investment
B)A decrease in consumption
C)An increase in imports
D)An increase in saving
E)All of the above

Question 54

The Following Questions Refer to the graph below. 57.Given short run aggregate supply S⁰,what level of aggregate demand is necessary for the economy to reach full employment?
A.Lower than D¹
B.D⁰
C.D¹
D.D²
E.Higher than D²
Given S¹ and D¹,which of the following changes reduces unemployment? A shift to

A)D⁰
B)D²
C)S⁰
D)All of the above
E)None of the above

Question 55

Economists in the 1960s believed that the Phillips curve relationship would

A)Allow governments to end inflation
B)Provide governments a means to control recessions
C)Discourage imports
D)Provide policies that would trade off unemployment for inflation
E)None of the above

Question 56

If the economy is initially at full employment,an increase in aggregate demand will result in

A)Demand-pull inflation
B)Profit-push inflation
C)Cost-push inflation
D)Unemployment
E)Underemployment

Question 57

The marginal propensity to consume plus the marginal propensity to save

A)Represents what happens as a result of income changes
B)Must always sum to 1
C)Must always sum to 0
D)A and B
E)None of the above

Question 58

The Following Questions Refer to the graph below. 57.Given short run aggregate supply S⁰,what level of aggregate demand is necessary for the economy to reach full employment?
A.Lower than D¹
B.D⁰
C.D¹
D.D²
E.Higher than D²
Given D⁰ and S⁰,an increase in aggregate demand would lead to which of the following?

A)Higher unemployment
B)Lower unemployment
C)Inflation
D)Deflation
E)Recession

Question 59

Which of the following is a component of aggregate demand?

A)Consumption
B)Investment
C)Government spending
D)Exports and imports
E)All of the above

Question 60

The Following Questions Refer to the graph below. 57.Given short run aggregate supply S⁰,what level of aggregate demand is necessary for the economy to reach full employment?
A.Lower than D¹
B.D⁰
C.D¹
D.D²
E.Higher than D²
Demand-pull inflation is illustrated by a movement from

A)S⁰ to S¹
B)S¹ to S⁰
C)D⁰ to D²
D)D¹ to D⁰
E)q¹ to q⁰

Question 61

Unemployment affects both the current and future production of goods and services.

Question 62

Which of the following factors in an economy contribute to "sticky" wages?

A)Flexible working conditions
B)Competitive labor markets
C)Collective bargaining agreements
D)Highly mobile capital equipment
E)Investment flexibility

Question 63

Frictional unemploymentrefers to persons who are unemployed because the economy is in a recession.

Question 64

Frictional unemployment is a long-run event for particular individuals.

Question 65

An equilibrium level of national income implies the economy is operating at full employment.

Question 66

Cyclical unemployment occurs because workers have no marketable job skills.

Question 67

Involuntary unemployment occurs when wage rates are too low,i.e.,below competitive levels.

Question 68

Structural unemployment results from people changing jobs.

Question 69

A useful measure of the size of the workforce,that is,the number of individuals who are willing and able to work,is

A)The current population survey
B)The unemployment rate
C)The rate of job growth
D)The labor force participation rate
E)There are no useful measures of this information,due to the difficulties of gathering the sample

Question 70

The unemployment rate is the same for all demographic groups.

Question 71

Cyclical unemployment is due primarily to a decline in aggregate supply.

Question 72

Frictional unemployment is involuntary.

Question 73

Structural unemployment results from the economy experiencing a recession.

Question 74

Full employment means that everyone in the labor force has a joB.

Question 75

As an economy approaches full employment,real output declines.

Question 76

After the events of the 1970s,economists learned that

A)Attempts to trade off unemployment and inflation would only work for a short period of time
B)Shocks to the aggregate supply could alter the relationships between unemployment and inflation
C)The Phillips curve relationship was not stable
D)The Phillips curve shifted over time
E)All of the above

Question 77

By how much must investment spending increase to increase output by $500 if the MPC is 0.8?

A)$100
B)$300
C)$400
D)$500
E)More than $500

Question 78

If leakages exceed injections,unemployment will result.

Question 79

Economic policy makers in the 1960s held that governments could

A)Engage in expansionary and contractionary policies to manage the economy
B)Spend their way out of business cycles
C)Eliminate unemployment
D)Choose how much to produce
E)None of the above

Question 80

In an economy like that of the US,due to a variety of institutional and social factors,wages tend to be

A)Very flexible
B)Flexible during recessions
C)Highly rigid
D)Affected only by Congressional legislation
E)Sticky