Question 1

Which statement about the weekly jobs report is NOT true?
A) It is released by the Department of Labor.
B) It contains an estimate of the total number of people receiving unemployment benefits.
C) It is used as a way to estimate trends in layoffs.
D) It is used as a way to estimate trends in hiring.

Accepted Answer

The weekly jobs report does not contain an estimate of the total number of people receiving unemployment benefits. It does, however, provide information on the number of initial jobless claims filed, which can be used to estimate trends in layoffs. It also includes data on nonfarm payrolls and the unemployment rate, which can be used to estimate trends in hiring.

Question 2

A consumer price index of 115 means that prices rose by 15% from the base year.

Accepted Answer

A consumer price index compares the current prices of goods and services to the prices in a base year. A CPI of 115 means that prices have increased by 15% since the base year.

Question 3

If actual unemployment is at its natural rate
A) inflation is very low.
B) there is deflation.
C) the unemployment rate is zero.
D) interest rates are rising.

Accepted Answer

When actual unemployment is at its natural rate, inflation is very low because there is no upward pressure on wages and prices due to excess labor supply. This is because the labor market is in equilibrium, where the number of job seekers matches the number of job openings. Thus, there is no need for firms to offer higher wages to attract workers, which keeps inflation low.

Question 4

The labor force is defined as the
A) total number of those employed.
B) total number of the employed and unemployed.
C) total population less the number unemployed.
D) number of workers seeking a paid job.

Accepted Answer

The labor force is the total number of individuals who are either currently employed or unemployed but actively seeking employment. Therefore, the best choice is B, as it includes both the employed and unemployed individuals.

Question 5

Unemployment statistics in the United States are generally used to gauge the state of the economy.

Accepted Answer

Unemployment statistics are often viewed as a key economic indicator and used to assess the strength or weakness of the U.S. economy. Changes in the unemployment rate can reflect shifts in the labor market, consumer confidence, and overall economic performance.

Question 6

If the cost of a typical market basket is 400 in 2018, 450 in 2019, and 550 in 2020, then during this period the economy is undergoing
A) inflation.
B) disinflation.
C) deflation.
D) hyperinflation.

Accepted Answer

Inflation is the process where there is a general increase in the price level of goods and services in an economy over a period of time. This is reflected in the increasing cost of the market basket over the period specified.

Question 7

Since 2008, females have had a higher unemployment rate than males.

Accepted Answer

Historically, unemployment rates have fluctuated for both genders, but there have been periods where males had a higher unemployment rate than females, especially during economic downturns that heavily impacted industries dominated by male employment, such as construction and manufacturing.

Question 8

The natural rate of unemployment
A) occurs when the unemployment rate is zero and everyone who is willing to work has a job.
B) fluctuates with the business cycle.
C) is associated with the economy's maximum output rate consistent with low inflation.
D) never changes.

Accepted Answer

The natural rate of unemployment is the level of unemployment consistent with the economy's maximum output rate without causing inflationary pressure. This rate is influenced by structural factors such as technological change, demographics, and labor market institutions. It is not zero unemployment, as there will always be some level of frictional and structural unemployment in any economy. It may fluctuate over time due to changes in these structural factors, but it is not directly tied to the business cycle.

Question 9

A glut of oil in the world market would likely result in _____ in the United States.
A) inflation
B) disinflation
C) core inflation
D) hyperinflation

Accepted Answer

A glut of oil in the world market would lead to a decrease in the cost of oil, leading to a decrease in the prices of goods and services. This would result in disinflation, which is a decrease in the rate of inflation.

Question 10

Cyclical unemployment occurs when
A) workers are fired.
B) workers quit their jobs to raise a family.
C) the economy slows down, and workers are laid off.
D) workers retire earlier than age 66.

Accepted Answer

Cyclical unemployment happens due to fluctuations in the business cycle. When the economy slows down, companies lay off workers, creating unemployment. The other options, such as workers being fired, quitting to raise a family, or retiring early, are not necessarily related to the business cycle.

Question 11

The goal of unemployment policy is to eliminate frictional unemployment.

Accepted Answer

The goal of unemployment policy is not necessarily to eliminate frictional unemployment, as this type of unemployment is temporary and due to movements in the job market. The goal is to reduce cyclical unemployment (caused by economic downturns) and structural unemployment (due to a skills mismatch between workers and available jobs).

Question 12

Kendra has just signed a three-year lease. The next day, she learns that the inflation rate has increased more than expected. This unanticipated inflation benefits Kendra.

Accepted Answer

Because Kendra's lease payments are fixed, the real value of her payments decreases as inflation rises, effectively reducing the cost of her lease in real terms.

Question 13

Nominal GDP in 2006 was $13,458.2 billion. In 2006, the GDP deflator was 116.9. What was the real GDP for 2006 if the GDP deflator uses 2000 as the base year?
A) $11,512.6 billion
B) $11,522.5 billion
C) $15,732.6 billion
D) $15,746.1 billion

Accepted Answer

Real GDP = Nominal GDP / (GDP deflator/100)
Real GDP in 2006 = $13,458.2 billion / (116.9/100) = $11,512.6 billion.

Question 14

The goal of deflating a GDP series is to see how much real output has changed.

Accepted Answer

Deflating a GDP series involves adjusting for inflation in order to determine the changes in real output over time. This allows for a more accurate assessment of economic growth or contraction.

Question 15

A consumer price index of 107 means that prices rose by 7% from the previous year.

Accepted Answer

A consumer price index (CPI) of 107 indicates that prices have increased by 7% compared to the base year, not necessarily the previous year.

Question 16

Full employment is defined as zero unemployment.

Accepted Answer

Full employment does not mean zero unemployment; it refers to the level of employment at which virtually all individuals willing and able to work at prevailing wage rates are employed, accounting for frictional and structural unemployment.

Question 17

The GDP deflator is the narrowest of the measures of inflation.

Accepted Answer

The GDP deflator is a broad measure of inflation that includes all goods and services produced in an economy, while other measures such as the Consumer Price Index (CPI) and Producer Price Index (PPI) are more narrow.

Question 18

The unemployment rate is defined as the number _____ divided by the _____.
A) unemployed; population
B) unemployed; number working
C) unemployed; number in the labor force
D) passively looking for a job; number in the labor force

Accepted Answer

The unemployment rate is the percentage of the labor force that is unemployed, which is why it is defined as the number of unemployed people divided by the number in the labor force. Choice A is incorrect because the population includes people who are not in the labor force (e.g. children, retirees) and therefore should not be included in the calculation of the unemployment rate. Choice B is incorrect because the number of people working does not tell us anything about the unemployment rate, as it only considers those who are employed and not those who are looking for work. Choice D is incorrect because the unemployment rate includes both actively and passively looking for a job, not just those who are actively seeking employment.

Question 19

A cost-of-living index measures the amount of expenditures needed to maintain a certain standard of living, while a cost-of-goods index measures the amount of expenditures needed to purchase a given basket of goods.

Accepted Answer

The statements are true.

Question 20

The GDP deflator shows that since the mid-1980s, the U.S. economy has had
A) deflation.
B) hyperinflation.
C) an increasing inflation rate.
D) disinflation.

Accepted Answer

The GDP deflator is a measure of the overall inflation in an economy. If the GDP deflator is increasing at a decreasing rate, it is known as disinflation. Therefore, the correct answer is D - disinflation. There has been a gradual decrease in the inflation rate since the mid-1980s, which is reflected in the GDP deflator.

Quiz 6: Measuring Inflation and Unemployment

Which statement about the weekly jobs report is NOT true?

A consumer price index of 115 means that prices rose by 15% from the base year.

If actual unemployment is at its natural rate

The labor force is defined as the

Unemployment statistics in the United States are generally used to gauge the state of the economy.

If the cost of a typical market basket is 400 in 2018, 450 in 2019, and 550 in 2020, then during this period the economy is undergoing

Since 2008, females have had a higher unemployment rate than males.

The natural rate of unemployment

A glut of oil in the world market would likely result in _____ in the United States.

Cyclical unemployment occurs when