Module 4 Quizzes & Tests

Question 1

True or false. A CPI compare prices between two years in a row.

Answer 1

False

The CPI compares the dollar expenditure of the Market Basket in a year to the dollar expenditure of the Market Basket in the base year not to the previous year.

Question 2

True or false. Between 1960 and 2010 in the United States, the labor force participation rate for men increased, but decreased for women.

Answer 2

False

The labor force participation rate for men decreased due to a decrease in manufacturing jobs, and an increase in personal safety nets for married men with working wives. The labor force participation rate increase because more women enter the labor force.

Question 3

An economies leaders are told that next year 40,000 people will be put out of work by new production technology for laptops. What type of unemployment will increase as a result of this?

1. Cyclical
2. Structural
3. Frictional

Answer 3

Structural

This is unemployment caused by changes in the structures of the economy particularly changes in technology that can lead to unemployment.

Question 4

The losers of an anticipated inflation are

1. No one
2. Borrowers
3. Everyone
4. People on fixed incomes, lenders, and savers

Answer 4

People on fixed incomes, lenders, and savers.

Inflation destroys purchasing power of a currency. When it is unexpected, people on fixed incomes, lenders, and savers cannot protect themselves against the loss of purchasing power by having adjustments made in their incomes or interest rates.

Question 5

The full employment rate of unemployment is

Everyone in the population is employed

No one is unemployed

The entire labor force in the economy is fully employed

The natural or normal rate which includes frictional and structural unemployment

Answer 5

The natural or normal rate which includes frictional and structural unemployment.

Question 6

Who is in the labor force?

1. Everyone who is currently working.
2. Everyone over 16 years of age, non-institutionalized, who is working or actively looking for work.
3. The entire population of a country.
4. Everyone who is over 16 years of age.

Answer 6

Everyone over 16 years of age, non-institutionalized, who is working or actively looking for work.

Question 7

The leaders are told that inflation is predicted to be 17% next year. Everyone in the country would know this prediction. Should the country’s leaders be worried that this will hurt any specific group in the country?

1. Yes, it will hurt borrowers
2. No specific group will be hurt
3. Yes, it will hurt lenders
4. Yes, it will hurt retirees

Answer 7

No specific group will be hurt.

Since this is anticipated inflation, everyone will be able to plan and protect themselves against the negative effects of inflation.

Question 8

What is the formula to calculate the unemployment rate?

Answer 8

Unemployed

Question 9

When the jobs available in the market do not fit the skills of those looking for work, the economy is experiencing

Frictional unemployment

Voluntary unemployment

Cyclical unemployment

Structural unemployment

Answer 9

Structural unemployment

Structural unemployment occurs when there is a mismatch between the jobseekers and the skills or locations of the available jobs.

Question 10

True or false. There are no benefits from unemployment.

Answer 10

False

The benefits of unemployment are that it allows for economic growth without increasing inflation and impose discipline of the labor.

Question 11

What is the formula for calculating the inflation rate?

1. CPI:t - CPI:base / CPI:base * 100
2. CPI:t - CPI:t-1 / CPI:t-1 * 100
3. CPI:t / CPI:t-1 * 100

Answer 11

The correct answer is number two.

Question 12

During the expansionary phase of the business cycle, it is likely that

1. Output decreases, the price level will increase, and the unemployment rate will decrease.
2. Output increases, the price level increase, and the unemployment rate decreases.
3. Output decreases, the price level will increase, and the unemployment rate will increase.
4. Output increases, the price level will increase, and the unemployment rate will increase.

Answer 12

Output increases, the price level increase, and the unemployment rate decreases.

Question 13

From 1929 to 1939 the most severe downturn in US history was called what?

Answer 13

The Great Depression

Question 14

True or false. The labor force is the sum of active workers and inactive job seekers.

Answer 14

False

Question 15

What is the formula for labor force participation rate?

Answer 15

We

Question 16

True or false. In an anticipated inflation, lenders gain more than borrowers.

Answer 16

False

If you lend $100 with 10% interest-rate anticipating zero inflation rate, you will get $110 from your borrower. However, if an unanticipated 10% inflation rate occurs, (110÷1.10), you will get $100 from your borrower. Therefore, the borrower is the gainer in the process.

Question 17

What is the economic condition an economy will be facing if the predictions of increasing inflation and increasing unemployment both come true?

1. Stagflation
2. Recession
3. Expansion
4. Trough

Answer 17

Stagflation

Stagflation is when there is increasing inflation and increasing unemployment. This is the result of supply shocks. The United States experienced stagflation in the 1970s.

Question 18

True or false. The labor force is the sum of employed workers and active job seekers.

Answer 18

True

The number of employed people and the number of active job seekers are two components of the labor force.

Question 19

True or false. Unemployment that occurred due to the relocation of telemarketing companies to India is structural.

Answer 19

True

Question 20

The consumer price index (CPI) for a given year T is

1. Total $ market basket for year T / Total $ for base year * 100
2. Total $ market basket for year T / Total $ market basket for year T-1 * 100
3. Total $ market basket for year T / Total $ difference market basket for year T * 100
4. Total $ market basket in base year / Total $ market basket for year T * 100

Answer 20

The correct answer is number one

Question 21

Which of the following problem will an economy face due to the increase in unemployment?

1. Only social misery
2. Both lost production and social Missouri
3. Only lost production
4. Inflation

Answer 21

Both lost production and social misery

Question 22

If the price index between your one and your two rises from $347-$386, then the inflation rate is what?

Answer 22

11%

(386-347) / 347 *100 equals 0.112 or 11%

Question 23

True or false. Unemployment caused by the 2007 to 2009 recession is cyclical.

Answer 23

True

Question 24

Who does not understate the unemployment rate?

Discouraged workers

People who prefer to continue to receive unemployment benefits

Under employed workers

Answer 24

People who prefer to continue to receive unemployment benefits.

This overstates the unemployment rate, since they are avoiding available jobs.

Question 25

True or false. The previous unemployment rate will fall if both new employment and unemployment numbers each increased by 100,000 people.

Answer 25

False

In the numerator, The increase is only 100,000 (unemployed number), but in the denominator, the increase will be 200,000 (unemployed + employed). Therefore, the unemployment rate will increase.

Question 26

What are the three types of unemployment?

1. Structural, cyclical, frictional
2. Discouraged, under employed, fully employed
3. Retirees, homemakers, full-time students

Answer 26

Structural, cyclical, frictional

Question 27

A country’s leaders are worried about people who the unemployment rate does not include, but who are being hurt by a week labor market. Which of the following would not be included in the unemployment rate?

1. College students
2. Discouraged and under employed workers
3. Discouraged and unemployed workers
4. Under employed and unemployed workers

Answer 27

Discouraged and under employed workers

Both of these groups need to be considered by policymakers when thinking about the health of the economy, but are not included in the unemployment rate.