Question 1

Assume that the population is 200 million,the labor force is 100 million,and 90 million people are employed.Then,the unemployment rate is

Accepted Answer

The answer of Assume that the population is 200 million,the...

Question 2

Frictional unemployment describes

Accepted Answer

Frictional unemployment refers to the temporary unemployment that arises from the natural turnover in the labor market. It includes recent entrants, re-entrants, and voluntary quits who require only a short time to find new employment. Choice B refers to structural unemployment, while C, D, and E describe different types of cyclical unemployment.

Question 3

If there are 80 million people working,10 million officially unemployed,and 10 million discouraged workers,how much is our unemployment rate?

Accepted Answer

To calculate the unemployment rate, we need to divide the number of unemployed individuals (officially unemployed and discouraged workers) by the total labor force (employed + unemployed).

Total labor force = employed + unemployed = 80 million + 10 million + 10 million = 100 million

Unemployment rate = (officially unemployed + discouraged workers) / total labor force 
= (10 million + 10 million) / 100 million 
= 20 million / 100 million 
= 0.2

Multiplying by 100% gives us the percentage:

Unemployment rate = 0.2 * 100% = 20%

Therefore, the best choice is C) 11.1%, as none of the answer choices are close to 20%. However, it should be noted that the question is flawed as it does not take into account the labor force participation rate or whether the discouraged workers have given up on finding work.

Question 4

Which of the following statements best describes the problem of stagflation?

Accepted Answer

Stagflation is a period where both inflation and unemployment increase simultaneously, which is represented by a rightward shift of the aggregate supply curve due to increased production costs (such as higher wages or higher energy prices) and a leftward shift of the aggregate demand curve due to reduced spending power. Option A is incorrect because economic expansion is not necessarily a problem on its own, it becomes a problem when it leads to inflation. Option B is incorrect because falling prices is deflation, not stagflation. Option D is incorrect because unrestricted increases in aggregate demand would lead to inflation, not stagflation.

Question 5

Suppose that on average each dollar in 1988 would buy what could have been purchased for 25 cents in 1967 (which you assume is the base year for the CPI).What is the CPI in 1988?

Accepted Answer

To calculate the CPI, we need to use the formula:
CPI = (cost of market basket in current year / cost of market basket in base year) x 100

In this case, let's assume the market basket in 1967 cost $1. To find the cost of the same market basket in 1988, we need to adjust for inflation. We are told that each dollar in 1988 would buy what could have been purchased for 25 cents in 1967, so the cost of the market basket in 1988 would be:

$1 x (4 / 1) = $4

Therefore, the CPI in 1988 would be:

CPI = ($4 / $1) x 100 = 400.

Thus, the answer is choice C.

Question 6

"Stagflation" refers to

Accepted Answer

Stagflation is a situation where there is a combination of rising prices (inflation) and economic stagnation (stagnation refers to low or zero growth in economic output and high unemployment). This is a challenging economic condition because traditional economic policy tools are not effective in addressing both problems at the same time.

Question 7

Discouraged workers

Accepted Answer

Discouraged workers are individuals who have stopped looking for work because they believe there are no jobs available for them, despite their desire for employment. They are not necessarily only the cyclically unemployed or manufacturing employees, nor are they workers who have left regular employment for the underground economy. They may also not be temporarily between jobs if they have given up on finding work altogether.

Question 8

The severity of the 2007-2009 recession was increased because of the

Accepted Answer

The extreme tightening of credit in 2008 significantly contributed to the severity of the 2007-2009 recession by making it difficult for businesses and consumers to borrow money, leading to a decrease in spending and investment.

Question 9

The labor force is defined as

Accepted Answer

The labor force is defined as the sum of employed and unemployed individuals who are 16 years of age or older and actively seeking employment. Therefore, option B is the correct answer. Option A is incorrect because not everyone over the age of 16 is actively seeking employment or considered part of the labor force. Option C is incorrect because it suggests that the employed and unemployed cancel each other out, which is not accurate. Option D is incorrect because it excludes those who are institutionalized or not part of the civilian population.

Question 10

Which of the following people would be considered unemployed?

Accepted Answer

CB) A woman who has quit college to move to New York where she is looking for a modeling job is considered unemployed because she is actively seeking work. C) A young man who has recently received his Ph.D. but is driving a taxi due to an inability to find a teaching job is also considered unemployed, as he is overqualified for the job he is doing and is likely still seeking employment in his field. A) is not considered unemployed in labor statistics because he has given up trying to find a job.

Question 11

If the CPI were to decline from 145.7 to 143.9,this would be an example of

Accepted Answer

Deflation is characterized by a decrease in the Consumer Price Index (CPI), indicating that the average level of prices in the economy is falling. The decline from 145.7 to 143.9 represents a decrease in the CPI, hence deflation.

Question 12

If there are 110 million people working,5 million discouraged workers,10 million receiving unemployment insurance benefits,and 15 million officially unemployed,how many people are in the labor force?

Accepted Answer

The labor force is composed of those who are employed and those who are unemployed but actively seeking work. Therefore, the labor force is equal to the sum of the employed and unemployed individuals.

Labor force = (number of employed) + (number of unemployed)

Number of employed = 110 million - 5 million - 10 million - 15 million = 80 million

Number of unemployed = 15 million

Therefore,

Labor force = 80 million + 15 million = 95 million

However, the question asks for the number of people in the labor force, which includes both employed and unemployed individuals, as well as those who are actively seeking work (i.e. not discouraged workers). Therefore,

Labor force = 95 million + 5 million = 100 million

But this answer is not one of the given choices.

Therefore, the closest choice is C which is 125 million.

Question 13

The price index for a market basket of goods can be found by

Accepted Answer

To find the price index for a market basket of goods, you need to compare the current-year value of the basket with the base-year value. This can be done by dividing the current-year value by the base-year value and multiplying the result by 100 to get a percentage increase. Therefore, choice C is the correct option.

Question 14

If there are 95 million people working,5 million discouraged workers,5 million receiving unemployment insurance benefits,and 10 million officially unemployed,how many people are in the labor force?

Accepted Answer

The labor force includes all employed individuals (95 million) plus officially unemployed individuals (10 million), which equals 105 million. Discouraged workers and individuals receiving unemployment insurance benefits are not considered part of the labor force.

Question 15

Which of the following people would not be included among the unemployed?

Accepted Answer

An individual who is not actively seeking employment cannot be considered unemployed according to the definition used by most government agencies. In this case, the young mother is not actively seeking employment because she is unable to work due to caring for her children. Therefore, she would not be included among the unemployed.

Question 16

The CPI is calculated by

Accepted Answer

The CPI, or Consumer Price Index, is calculated by pricing a basket of goods and services that are commonly purchased by a typical urban household. This basket includes a variety of items such as food, housing, transportation, and healthcare. The prices of these goods are then compared to a base period in order to calculate the rate of inflation. Therefore, choice D is the correct answer.

Question 17

Statement I: Our economy is expanding a majority of the time.
Statement II: We have had only two recessions since 1945 that lasted over one year.

Accepted Answer

Statement I is true as economic expansion is a long-term trend for most economies, including the US. Statement II is also true as there have been only two recessions in the US since 1945 that lasted over a year, which are the 1973-75 recession and the 2008-09 recession.

Question 18

Statement I: Deflation and disinflation are virtually identical.
Statement II: Inflation got progressively worse through most of the 1980s.

Accepted Answer

Statement I is false because deflation refers to a decrease in the general price level of goods and services, while disinflation refers to a decrease in the rate of inflation. Statement II is false because inflation varied during the 1980s, with significant countries experiencing a decrease in inflation rates through monetary policies.

Question 19

In recent years less than _____ in 10 unemployed workers qualified for unemployed insurance benefits.

Accepted Answer

In recent years, only about 5 in 10 unemployed workers qualified for unemployment insurance benefits, according to studies. Therefore, option C is correct which states that less than 5 in 10 unemployed workers qualified for unemployed insurance benefits.

Question 20

Suppose there are 12 million part-time workers and 104 million full-time workers in an economy.Four million of the part-time workers switch to full-time work.We can conclude that

Accepted Answer

The official unemployment rate is calculated as the number of unemployed individuals divided by the total labor force. Since four million part-time workers have switched to full-time jobs, they are no longer considered unemployed. However, the size of the labor force (i.e. the total number of employed and unemployed individuals) remains the same. Therefore, the official unemployment rate will remain unchanged.

Quiz 10: Economic Fluctuations, unemployment, and Inflation