Question 1

If Year 1 is the base year, the price index for Year 2 is 105, and the price index for Year 3 is
103. What is the inflation rate in Years 2 and 3? Explain what has happened to the cost of living between Years 1 and 2 and Years 2 and 3.

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Question 2

Suppose that the economy is experiencing a 3 percent unemployment rate when the natural rate of unemployment is 5 percent. Is this unemployment rate sustainable in the long run? Explain.

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Question 3

-Answer parts (a) through (e) using Table 6.9 and the following information. Arboc has a population (ages 16 and older) of 2,000,000. The labor- force participation rate is 90%.
(a) Based on the information, calculate the number of workers in the labor force.
(b) Based on the information, calculate the number of workers unemployed in 1997
(c) Based on the information, calculate the number of workers employed in 1999.

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-Answer parts (a) through (e) using Table...

Question 4

What is the Consumer Price Index?

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Question 5

Explain the three different types of unemployment. Give an example of each type.

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Question 6

For each of the following, indicate if the person would be classified as employed, unemployed, or not in the labor force:
(a) a 70- year- old man who left his job to help his daughter in her business for 10 hours a week,
(b) a 20- year- old college student who is out of school for the summer and is looking for a job,
(c) a 30- year- old woman with a Ph.D. in history who has not been able to find a teaching position and is driving a cab 30 hours a week,
(d) a 40- year- old steel worker who isn't working and has given up searching for a job,
(e) a 14- year- old movie star starts working on a new episode of Star Trek.

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Question 7

Explain why some economists argue that counting discouraged workers as unemployed gives a better picture of the unemployment situation. How would the magnitude of the unemployment rate change if discouraged workers were counted as unemployed?

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Question 8

You are an employee of the Bureau of Labor Statistics involved in the monthly survey of households used to estimate the unemployment rate. In each of the following cases, classify the individual as employed, unemployed, or not in the labor force. Explain your classification.
(a) During the entire week containing the 12th of the month, Rosie the Riveter misses work simply because she didn't feel like going in to work.
(b) Jenny Wren is a volunteer 20 hours a week on a Rape Crisis telephone hotline. She feels she makes an important contribution to society and would not accept a paying job if one was offered to her.
(c) McCauley Culkin is a hugely successful film star, age 12, who has earned over
$5,000,000 each year for the past five years. Currently, McCauley is filming a new movie on location in Tenerife.
(d) Maxwell Edison, a full- time Ph.D. student, is involved in groundbreaking research in fiber optics. His dissertation advisor has already claimed that Maxwell's work will revolutionize telecommunications.
(e) Maggie Madd, 84, works 10 hours a week doing cleaning services for her son, Norman Neurotic. He pays her minimum wage.

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Question 9

You are an employee of the Bureau of Labor Statistics involved in the monthly survey of households used to estimate the unemployment rate. In each of the following cases, classify the individual as frictionally, structurally, or cyclically unemployed. Explain your classification.
(a) There has been a general economic slowdown. Because of weak demand, Andy Capp has lost his job at the docks.
(b) Phil McCafferty, a newly qualified dental school graduate, is looking for a place to set up practice.
(c) Coal miner Ned Ludd is thrown out of work by the introduction of a more mechanized production process.
(d) Latosha Hogan, a computer programmer with a large bank, quit her job two months ago in search of a better- paid programming position. She is still looking.

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Question 10

-Based on the information in Table 6.14, calculate the inflation rate for 2004, 2005, 2006, and 2007.

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-Based on the information in Table 6.14,...

Question 11

Explain why a large deflation could force many borrowers to default on their loans.

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Question 12

Answer parts (a) through (d) using the information in Table 6.7.
(a) Calculate the number of unemployed workers.
(b) Calculate the number of workers in the labor force.
(c) Calculate the unemployment rate.
(d) Calculate the labor- force participation rate.
(e) Calculate the unemployment rate if 50,000 unemployed workers become "discouraged" and decide to stop looking for work?

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Question 13

Unemployment insurance benefits are typically temporary and completely reimburses the worker's lost earnings.

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Unemployment insurance benefits are typically temporary, but they only partially reimburse the worker's lost earnings, usually only up to a certain percentage or amount per week.

Question 14

-Answer parts (a) through (e) using the information in Table 6.8.
(a) Calculate the number in the labor force.
(b) Calculate the number of unemployed workers.
(c) Calculate the unemployment rate.

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-Answer parts (a) through (e) using the...

Question 15

What will happen to the unemployment rate when some unemployed workers quit working and are now classified as "discouraged workers"?

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Question 16

During a press conference, the Secretary of Employment notes that the unemployment rate is 7.0%. As a political opponent, how might you criticize this figure as an underestimate? In rebuttal, how might the Secretary argue that the reported rate is an overestimate of unemployment?

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Question 17

Suppose that the inflation rate measured by changes in the Consumer Price Index is 5%. Does this mean that every individual's cost of living has increased by 5%? Explain.

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Question 18

Is seasonal unemployment one of the basic types of unemployment? Explain why or why not.

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Question 19

How does the Consumer Price Index differ from the GDP chain index?

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Question 20

Suppose that Linda wants to calculate a price index for the goods that she commonly purchases each week. The cost of her bundle of goods and services was $350 in 2008, $445 in 1999, and $470 in 2010. If Linda uses 2008 as the base year, what will be the value of her price index for 2008, 2009, and 2010?

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Quiz 6: Unemployment and Inflation

If Year 1 is the base year, the price index for Year 2 is 105, and the price index for Year 3 is 103. What is the inflation rate in Years 2 and 3? Explain what has happened to the cost of living between Years 1 and 2 and Years 2 and 3.