Deck 4: Measuring the Economy 2: Unemployment and Inflation

Question 1

Which of the following people would be regarded as unemployed according to the Statistics Cananda definition?

A)A steelworker who,laid off a year ago,has given up looking for a job.
B)A homemaker on vacation with the family.
C)A homemaker who does volunteer work with the local library.
D)A homemaker who works 5 hours per week at the minimum wage at the local library.
E)A retired schoolteacher who is seeking a part-time job at the local library.

Answer 1

A retired schoolteacher who is seeking a part-time job at the local library.

Question 2

Which of the following people would be regarded as employed according to the Statistics Cananda definition?

A)A homemaker who works 14 hours a day taking care of the home and family.
B)A homemaker who does 5 hours of volunteer work each week at the local library.
C)A homemaker who works for 5 hours a week at the minimum wage for the local convenience store.
D)A steelworker,laid off a year ago,who has given up looking for a job.

Answer 2

A homemaker who works for 5 hours a week at the minimum wage for the local convenience store.

Question 3

Refer to the information above to answer this question.What is the value of real GDP per capita in 2016?

A)$6,336
B)$14,500
C)$14,962
D)$17,955
E)$21,545

Answer 3

$14,962

Question 4

According to the official Statistics Canada definition,what is the minimum amount of time a person must have worked in the previous week in order to be counted as employed?

A)15 minutes.
B)60 minutes.
C)5 hours.
D)30 hours.
E)40 hours.

Question 5

What has happened to the labour force participation rates in Canada in the last 35 years?

A)The male participation rate has increased while the female participation rate has decreased.
B)The male participation rate has decreased while the female participation rate has increased.
C)Both male and female participation rates have decreased.
D)Both male and female participation rates have increased.

Question 6

Which of the following is an example of a frictionally unemployed person?

A)A homemaker re-entering the labour force now that her children are older but who has not yet found employment.
B)A middle-aged man who,having quit his previous job,is searching for something more satisfying.
C)A contract college instructor who has left her job for a year and is looking for work at another college.
D)A recent commerce graduate seeking her first job.
E)A pulp-mill worker is laid off because the mill's inventories are at a all-time high.

Question 7

What is meant by the participation rate?

A)The percentage of the population who are in the labour force.
B)The percentage of the working age population who are in the labour force.
C)The percentage of the population who are in the working age population.
D)The percentage of the labour force who are employed.

Question 8

What is the GDP Deflator?

A)A measure of the price level of goods included in the GDP.
B)It is another name for the Consumer Price Index.
C)It is equal to nominal GDP minus the price level.
D)It is equal to nominal GDP minus the change in the price level.
E)It is equal to nominal GDP divided by the price level.

Question 9

How is unemployment defined?

A)The number of persons between the ages of 15 and 65 who worked less than 8 hours in the previous week.
B)The number of persons over the age of 15 who worked less than 8 hours in the previous week.
C)The number of persons over the age of 15 who worked at least 1 hour in the previous week.
D)The number of persons between the age of 15 and 65 who worked more than 1 hour in the previous week.
E)The number of persons 15 years of age and older who are not in gainful employment but who are actively seeking employment.

Question 10

Refer to the information above to answer this question.What is the value of real GDP in 2016?

A)$7.9
B)$790
C)$1,137.6
D)$6,336
E)$14,962

Question 11

What is the definition of the unemployment rate?

A)The ratio of unemployed to employed workers.
B)The number of employed workers minus the number of workers who are not in the labour force.
C)The percentage of the labour force which is unemployed.
D)The percentage of the total population which is unemployed.
E)The percentage of the working age population which is unemployed.

Question 12

Refer to the information above to answer this question.What is the value of real GDP in 2017?

A)$638
B)$804
C)$1,013
D)$1,876
E)$6,804

Question 13

Refer to the information above to answer this question.What is the value of the GDP deflator in 2016?

A)93.9
B)100.0
C)104.6
D)103.0
E)108.2

Question 14

By how much has Canada's unemployment rate fluctuated since 1990?

A)Between 3.5% and 10.5%
B)Between 6.0% and 11.4%
C)Between 4.0% and 10.5%
D)Between 7.8% and 10.5%
E)Between 8.0% and 14.0%

Question 15

How is the GDP deflator calculated?

A)Nominal GDP minus the price level and multiplied by 100.
B)Nominal GDP divided by the price level and multiplied by 100.
C)Real GDP divided by nominal GDP and multiplied by 100.
D)Nominal GDP divided by real GDP and multiplied by 100.

Question 16

Refer to the information above to answer this question.What is the population in 2015?

A)8.27
B)17
C)52.2
D)61.8
E)107.2

Question 17

Refer to the information above to answer this question.What is the value of the GDP deflator in 2015?

A)0
B)100.0
C)104.8
D)108.0
E)Cannot be determined from the information

Question 18

Refer to the information above to answer this question.What is the value of nominal GDP in 2017?

A)$638
B)$950
C)$1,013
D)$1,876
E)$3,474

Question 19

Refer to the information above to answer this question.What is the value of the GDP deflator in 2015?

A)52.2
B)61.8
C)84.4
D)100
E)118.0

Question 20

Refer to the information above to answer this question.What is the value of the GDP deflator in 2017?

A)95.0
B)100.0
C)106.2
D)107.7
E)106.5

Question 21

Which of the following is false of frictional unemployment?

A)It is an inevitable part of a market economy.
B)It is a result of the time needed to match people seeking employment with job vacancies.
C)It often involves people seeking "the right job" rather than "just a job."
D)It can be eliminated.

Question 22

Which of the following is included in the natural rate of unemployment?

A)Frictional unemployment only.
B)Frictional and structural unemployment.
C)Frictional,structural and cyclical unemployment.
D)It can be eliminated.

Question 23

What is the labour force status of a student who is looking for a job following graduation from college?

A)She is not officially included in the labour force.
B)She is a part of structural unemployment.
C)She is part of cyclical unemployment.
D)She is part of frictional unemployment.

Question 24

What is one reason that the natural rate of unemployment has increased over the last three decades?

A)A larger number of male workers have entered the labour force.
B)Longer job-search time by more affluent job seekers.
C)Female participation rates have been declining over the past two decades.
D)A reduction in employment insurance legislation.

Question 25

Which of the following relates to cyclical unemployment?

A)It is associated with an inflationary gap.
B)It is associated with the level of performance of the economy.
C)It is above zero when the economy is at the natural rate of unemployment.
D)It could also be called seasonal unemployment.

Question 26

What is meant by cyclical unemployment?

A)Unemployment that is caused by the fact that it takes time for people to find their first job or to move between jobs.
B)Unemployment which results from structural changes in an economy's industries.
C)Unemployment that occurs as a result of the recessionary phase of the business cycle.
D)Unemployment that occurs because people do not think that there are any jobs available.

Question 27

What is meant by frictional unemployment?

A)Unemployment that is caused by the fact that it takes time for people to find their first job or to move between jobs.
B)Unemployment which results from structural changes in an economy's industries.
C)Unemployment that occurs as a result of the recessionary phase of the business cycle.
D)Unemployment that occurs because people do not think that there are any jobs available.

Question 28

What occurs at the economy's natural rate of unemployment?

A)The economy achieves its output potential.
B)Frictional and structural unemployment are zero.
C)Only frictional unemployment exists.
D)Only structural unemployment exists.
E)Potential GDP is above actual GDP.

Question 29

What type of unemployment is associated with recessions?

A)Seasonal.
B)Structural.
C)Cyclical.
D)Natural.
E)Search.

Question 30

What type of unemployment would result if an entire industry is eliminated because of new technology?

A)Cyclical unemployment.
B)Frictional unemployment.
C)Structural unemployment.
D)Unemployment would not necessarily change.

Question 31

What is meant by structural unemployment?

A)Unemployment that is caused by the fact that it takes time for people to find their first job or to move between jobs.
B)Unemployment which results from structural changes in an economy's industries.
C)Unemployment that occurs as a result of the recessionary phase of the business cycle.
D)Unemployment that occurs because people do not think that there are any jobs available.

Question 32

According to most economists,presently,what is the natural rate of unemployment in Canada?

A)1% - 2%.
B)2% - 3%.
C)5% - 7%.
D)10%.
E)12% - 15%.

Question 33

Assume Brown is temporarily unemployed because she has voluntarily quit her job and will begin a better job with a new company next week.What is Brown considered to be?

A)Cyclically unemployed.
B)Frictionally unemployed.
C)Not officially included in the labour force.
D)Employed.
E)Structurally unemployed.

Question 34

Thompson has lost his job at a Vancouver Island pulp mill which has closed permanently.He is looking for work,but wants to go to college to study electronics and eventually find a job in television engineering.At the moment,what can we say about Thompson's employment status?

A)He is not officially included in the labour force.
B)He is cyclically unemployed.
C)He is structurally unemployed.
D)He is frictionally unemployed.
E)He is employed.

Question 35

Which of the following statements concerning the natural rate of unemployment is incorrect?

A)It is made up of both frictional and structural unemployment.
B)It is the rate of unemployment at full employment.
C)It is when the total number of job vacancies equals the number of people unemployed.
D)It is probably about 5% to 7% in Canada today.
E)It is when both frictional and structural unemployment is zero.

Question 36

When is the Canadian economy generally considered to be at "full employment"?

A)When 12 percent of the labour force is unemployed.
B)When 90 percent of the total population is employed.
C)When 90 percent of the labour force is employed.
D)When approximately 5 percent to 7 percent of the labour force is unemployed.
E)When everybody who would like a job has one.

Question 37

What is the cause of cyclical unemployment?

A)The recessionary phase of the business cycle.
B)The declining importance of goods production and the growing importance of service production in our economy.
C)The normal dynamics of a free market economy.
D)Technological change.
E)The changing nature of demand from one product to another.

Question 38

All of the following except one explain why there might be job vacancies even when unemployment exists.Which is the exception?

A)Because the unemployed do not possess the necessary skills.
B)Because the unemployed do not possess the necessary experience.
C)Because the unemployed are unwilling to work.
D)Because the jobs and the unemployed might not be in the same area.

Question 39

What is the natural rate of unemployment?

A)The unemployment rate experienced at the depth of a depression.
B)The full-employment unemployment rate.
C)The unemployment caused by frictional unemployment only.
D)The unemployment caused by structural unemployment only.
E)The amount of cyclical unemployment in an economy when frictional and structural unemployment are both zero.

Question 40

All of the following except one are valid explanations of why the natural rate of unemployment is now higher than it was twenty-five years ago.Which is the exception?

A)Wage rates are now much higher than they were in the past.
B)Unemployment benefits are higher than in the past.
C)People are taking longer to search for a new job.
D)More females are participating in the labour force than in the past.

Question 41

What percentage of Canada's labour force was unemployed in 2015?

A)1.1%
B)4.0%
C)5.2%
D)6.9%
E)11.6%

Question 42

As far as official statistics are concerned,how are part-time workers categorized?

A)As unemployed,which means that the official unemployment rate tends to overstate the real level of unemployment.
B)As unemployed,which means that the official unemployment rate tends to understate the real level of unemployment.
C)As fully employed,which means that the official unemployment rate tends to overstate the real level of unemployment.
D)As fully employed,which means that the official unemployment rate tends to understate the real level of unemployment.
E)As fractions of a fully-employed worker.

Question 43

What would be the effect of 50,000 unemployed people becoming discouraged workers?

A)The unemployment rate would remain unchanged,and the size of the labour force would decline.
B)Both the unemployment rate and the size of the labour force would decline.
C)The unemployment rate would decline,and the size of the labour force would remain unchanged.
D)Both the unemployment rate and the size of the labour force size would rise.

Question 44

Assume that the total population of a country is 32 million,its labour force is 20 million,and 18.4 million workers are employed.What is the unemployment rate?

A)5%.
B)8%.
C)8.7%.
D)31%.
E)It cannot be determined from the information given.

Question 45

The following information is from a hypothetical economy (all figures are in millions):

Refer to the information above to answer this question.What is the current unemployment rate?

A)6%.
B)10%.
C)12%
D)13.6%
E)37.5%.

Question 46

What is a discouraged worker?

A)An individual who wants to work but is no longer seeking employment because of the conviction that no opportunities exist.
B)An individual who may or may not be employed.
C)An individual who is included in the unemployment statistics.
D)An individual who is not part of the working age population.
E)An individual who is employed but is seeking a different situation.

Question 47

Below are various statistics for a hypothetical economy (all figures in millions)

Refer to the information above to answer this question.What is the participation rate of this economy?

A)80%.
B)60%.
C)75%.
D)50%.
E)62.5%.

Question 48

What is Okun's Law?

A)It measures the trade-off between the rate of inflation and the rate of unemployment.
B)It indicates the number of years it will take for any amount to double if compounded at a constant rate.
C)It quantifies the relationship between nominal and real incomes.
D)It shows the relationship between cyclical unemployment and the size of the GDP gap.
E)It states that supply creates its own demand.

Question 49

What does the GDP gap measure?

A)The difference between GNP and GDP.
B)The difference between potential GDP and actual GDP.
C)The difference between nominal GDP and real GDP.
D)The difference between this year's GDP and last year's GDP.
E)The difference between this year's potential GDP and last year's potential GDP.

Question 50

The following information is from a hypothetical economy (all figures are in millions):

Refer to the information above to answer this question.What is the annual rate of inflation?

A)120%.
B)20%.
C)0%.
D)It cannot be determined from the data given.

Question 51

What would be the effect of 100,000 discouraged workers entering the labour force?

A)Unemployment rates would remain unchanged,and the size of the labour force would increase.
B)Both unemployment rates and the size of the labour force would increase.
C)Unemployment rates would increase,and the size of the labour force would remain unchanged.
D)Both unemployment rates and the size of the labour force would decrease.

Question 52

Below are various statistics for a hypothetical economy (all figures in millions)

Refer to the information above to answer this question.What is the unemployment rate?

A)10%.
B)11.1%.
C)8.3%.
D)6.25%.
E)13.3%.

Question 53

How do economists measure the cost of unemployment?

A)By the amount by which actual GDP exceeds potential GDP.
B)By the amount by which potential GDP exceeds actual GDP.
C)By the difference between real GDP and nominal GDP.
D)By the difference between GDP and real GNP.
E)By the total costs of unemployment benefits and welfare payments that have to be paid out.

Question 54

Which of the following statements concerning discouraged workers in the economy is true?

A)They increase the size of the labour force,but do not affect the unemployment rate.
B)They reduce the size of the labour force,but do not affect the unemployment rate.
C)They may cause the official unemployment rate to understate the real amount of unemployment.
D)They may cause the official unemployment rate to overstate the real amount of unemployment.
E)They do not affect the size of the labour force,but do cause the unemployment rate to be higher than it would otherwise be.

Question 55

Suppose that in a particular economy there are 2 million part-time workers,10 million full-time workers,and 4 million unemployed.What is the effect on the unemployment rate of 2 million of the part-timers become full-time workers?

A)It would decrease.
B)It would increase.
C)It would remain unchanged.
D)The size of the labour force will increase.
E)There will be no immediate change,but in the long run it will decrease.

Question 56

Which of the following is true of official unemployment statistics?

A)They tend to understate the real amount of unemployment because individuals receiving unemployment benefits are counted as employed.
B)They tend to understate the real amount of unemployment because "discouraged workers" are not counted as unemployed.
C)They include both frictional and structural unemployment,but not cyclical unemployment.
D)They tend to overstate the real amount of unemployment because workers who are involuntarily working part-time are counted as being employed.
E)They tend to understate the real amount of unemployment because many people in the underground economy declare themselves unemployed whereas they are actually fully employed.

Question 57

What can we infer if the actual Canadian unemployment rate is above 10%?

A)That the economy must be on an upswing.
B)That potential GDP exceeds actual GDP.
C)That actual GDP exceeds potential GDP.
D)That actual GDP is equal to potential GDP.
E)That actual GDP is greater than real GDP.

Question 58

Suppose there are 2 million unemployed workers seeking jobs.After a period of time,two hundred thousand of them become discouraged over their job prospects and stop looking for work.What will the effect of this on the unemployment rate?

A)It will increase in the short run but would eventually decline.
B)It will increase.
C)It will fall.
D)It will be unchanged.
E)The question cannot be answered from this information.

Question 59

Why might the official unemployment rate be an understatement of actual levels?

A)Because both part-time workers and discouraged workers are included.
B)Because both part-time workers as well as those collecting EI but not actively seeking work are included.
C)Because people working in the underground economy are not included.
D)Because part-time workers are considered employed,and discouraged workers are not considered unemployed.
E)Because those not actively seeking work while collecting EI benefits and those in the underground economy are included.

Question 60

What would happen to the unemployment rate if it was not seasonally adjusted?

A)It would not differ from seasonally adjusted rates.
B)It would move in direct proportion to the business cycle.
C)Nothing since it is the normal way StatsCan reports unemployment.
D)It would normally rise in the winter and fall in the summer.

Question 61

Assume that goods X,Y,and Z constitute a "market basket" used to compute a price index and that 2014 is the base year.

Refer to the information above to answer this question.What is the price index in 2017?

A)132.
B)112.
C)110.
D)29.

Question 62

The following are selected statistics for a given year in a hypothetical economy:

Refer to the information above to answer this question.What is the amount of the GDP gap?

A)$20 billion.
B)$475 billion.
C)$435 billion.
D)$25 billion.
E)$525 billion.

Question 63

"For every 1 percent that the actual unemployment rate exceeds the natural rate,the economy's GDP falls 2.5 percent short of its potential." What is this a statement of?

A)The natural law of unemployment.
B)Okun's Law.
C)The rule of 70.
D)The law of full employment.

Question 64

The price of a movie ticket in 1959 was $2,while in 2017 it was $10.The price index in 1959 was 30 and in 2017 it was 116.4 (2002 = 100).What are the 1959 and 2017 ticket prices respectively measured in 2002 prices?

A)$5.40 and $5.40
B)$2 and $9
C)$1.81 and $30
D)$6.67 and $8.59

Question 65

Which of the following is required to construct a consumer price index?

A)The choice of a base year in which prices are defined as 100.
B)The creation of a representative basket of goods and services.
C)The determination of the inflation rate.
D)The calculation of changes in the level of consumption spending.

Question 66

Assume that the Consumer Price Index rises from 80 in one year to 88 in the next year.What is the rate of inflation?

A)10%.
B)20%.
C)12%.
D)6%.
E)8%.

Question 67

How can the rate of inflation be calculated?

A)By subtracting the real income from the nominal income.
B)By subtracting last year's price index from this year's price index.
C)By subtracting this year's price index from last year's price index,dividing the difference by this year's price index,and multiplying by 100.
D)By subtracting last year's price index from this year's price index and dividing the difference by last year's price index and multiplying by 100.
E)By dividing the real income by the nominal income and multiplying by 100.

Question 68

What is true of Canada's inflation rate from 2008 to 2015?

A)It has never been below 2%.
B)It ranged between 0.3% and 2.9%.
C)It ranged between 0.3% and 1.0%.
D)It has never been above 2%.

Question 69

Assume that goods X,Y,and Z constitute a "market basket" used to compute a price index and that 2014 is the base year.

Refer to the information above to answer this question.What is the price index in 2016?

A)22
B)120
C)115
D)100

Question 70

Given a flat 5% per year inflation rate,what would the Consumer Price Index be 3 years after the base year?

A)115.76.
B)115.0.
C)15.76.
D)15.0.
E)It cannot be determined.

Question 71

The following are selected statistics for a given year in a hypothetical economy:

Refer to the information to answer this question.Which of the following statements is true?

A)the GDP gap is $70 billion.
B)the GDP gap is $21 billion.
C)The potential GDP is $752.5 billion.
D)Potential GDP is $770 billion.

Question 72

Refer to the above information to answer this question.By how much have prices risen over the whole of this period?

A)4.5%.
B)10.0%.
C)20.0%.
D)32.0%.

Question 73

The following are selected statistics for a given year in a hypothetical economy:

Refer to the information above to answer this question.What is the size of the GDP gap in percentage terms for this economy?

A)0%.
B)2%.
C)5%.
D)8%.
E)4%.

Question 74

Refer to the above information to answer this question.What is the inflation rate in 2016?

A)7.3%
B)8.0%
C)9.5%
D)18.0%

Question 75

What is the difference between the CPI and the GDP deflator?

A)the GDP deflator includes imports while the CPI excludes them.
B)The CPI includes imports while the GDP deflator excludes them.
C)the CPI includes investment while the GDP deflator excludes it.
D)the CPI includes exports while the GDP deflator excludes them.

Question 76

Assume that the consumer price index in 2016 was 120 and in 2017 it was 126.What was the rate of inflation in 2017?

A)3%
B)5%
C)6%
D)20%
E)26%

Question 77

Assume an economy is producing only one product and that year 1 is the base year.Output and price data for a five-year period are as follows:

Refer to the information above to answer this question.What is the price index for year 3?

A)51.2.
B)125.
C)195.
D)It cannot be determined from the information given.

Question 78

Assume an economy is producing only one product and that year 1 is the base year.Output and price data for a five-year period are as follows:

Refer to the information above to answer this question.What is the nominal GDP in year 2?

A)$180.
B)$2,250.
C)$2,000.
D)$2,500.

Question 79

Assume that between 2005 and 2015 the price level doubled.What is the approximate average annual rate of inflation over this ten-year period?

A)10%
B)7%
C)5%
D)2%
E)1%

Question 80

Assume that goods X,Y,and Z constitute a "market basket" used to compute a price index and that 2014 is the base year.

Refer to the above information to answer this question.What is the annual inflation rate in 2018?

A)0%
B)10%
C)12%
D)Cannot be determined from the information.