Question 1

Which of the following means that the CPI overstates the actual inflation rate?

Accepted Answer

A)  Quality change bias
B)  New goods bias
C)  Outlet substitution bias
D)  All of the above cause the CPI to overstate inflation.E) B) and C)
F) A) and D)

Question 2

Assume the inflation rate falls from 4 per cent to 2 per cent. This means that

Accepted Answer

A)  the price level is increasing more slowly.
B)  the price level has fallen.
C)  the economy is experiencing deflation.
D)  real GDP is decreasing.E) A) and C)
F) None of the above

Question 3

If the people who take early retirement are not counted in the working- age population, then

Accepted Answer

A)  the labour force participation rate would be higher.
B)  the unemployment rate would be lower.
C)  the labour force participation rate would be less.
D)  the unemployment rate would be higher.E) B) and D)
F) A) and B)

Question 4

Suppose the natural unemployment rate equals 6 per cent and the current unemployment rate is 8 per cent. We can conclude that

Accepted Answer

A)  there is no structural unemployment.
B)  full employment is not occurring.
C)  there is no cyclical unemployment.
D)  there is no frictional unemployment.E) A) and B)
F) A) and C)

Question 5

The consumer price index (CPI)

Accepted Answer

A)  is the ratio of the average price of a typical basket of goods to the cost of producing those goods.
B)  compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period 2.
C)  compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period.
D)  measures the increase in the prices of the goods included in GDP.E) A) and D)
F) B) and C)

Question 6

Suppose the economy is experiencing frictional unemployment of 1 per cent, structural unemployment of 3 per cent and cyclical unemployment of 4 per cent. What is the natural unemployment rate?

Accepted Answer

A)  7 per cent
B)  3 per cent
C)  5 per cent
D)  4 per centE) All of the above
F) B) and D)

Question 7

Marginally attached workers fall into which of the following population categories?

Accepted Answer

A)  Not in the labour force
B)  Employed
C)  Labour force
D)  UnemployedE) A) and B)
F) B) and C)

Question 8

Which of the following BEST fits the definition of unemployed?

Accepted Answer

A)  Not working and not looking for work
B)  Working less than 40 hours per week
C)  Retired and not working
D)  Not working but looking for a jobE) All of the above
F) A) and B)

Question 9

Full employment occurs when the

Accepted Answer

A)  natural unemployment rate equals the frictional unemployment rate.
B)  unemployment rate equals the natural unemployment rate.
C)  cyclical unemployment rate equals the natural unemployment rate.
D)  unemployment rate is zero.E) B) and D)
F) None of the above

Question 10

During a recession, the ________.

Accepted Answer

A)  employment- to- population ratio increases
B)  number of marginally attached workers increases
C)  number of discouraged workers decreases
D)  unemployment rate decreasesE) C) and D)
F) None of the above

Question 11

The labour force is the sum of the

Accepted Answer

A)  number of employed people and the working- age population.
B)  total population and the number of unemployed people.
C)  working- age population and the number of unemployed people.
D)  number of employed people and the number of unemployed people.E) A) and B)
F) B) and C)

Question 12

Structural unemployment is the result of

Accepted Answer

A)  technological change or foreign competition.
B)  a slowdown in the rate of economic expansion.
C)  irresponsible workers with poor work habits.
D)  normal labour market turnover.E) B) and D)
F) B) and C)

Question 13

Frictional unemployment includes

Accepted Answer

A)  unemployment caused by industries moving overseas to better meet foreign competition.
B)  unemployment caused by normal labour turnover associated with people leaving and entering the labour force.
C)  unemployment caused by a lack of education so that workers do not possess necessary job skills.
D)  unemployment caused by automation of the work place that displaces unskilled workers.E) A) and C)
F) A) and D)

Question 14

The bias in the CPI typically

Accepted Answer

A)  understates inflation.
B)  overstates inflation.
C)  about half the time overstates and about half the time understates the inflation rate.
D)  cannot be measured or estimated.E) A) and C)
F) A) and D)

Question 15

In an economy, 40 million people are employed, 2 million are unemployed, and 8 million are not in the labour force. What is the labour force participation rate?

Accepted Answer

A)  80 per cent
B)  87.5 per cent
C)  83 per cent
D)  84 per centE) A) and D)
F) None of the above

Question 16

Which of the following situations BEST describes an individual who is cyclically unemployed?

Accepted Answer

A)  Catherine is a ski instructor who is not working because it is summer.
B)  Nicholas was laid- off when orders for Holden cars fell during a recession.
C)  Susan quit her job as a preschool teacher to try to find a better paying job.
D)  Matthew was an artillery man, but he has been unable to find work since he left the army.E) B) and D)
F) A) and B)

Question 17

Which of the following most likely would decrease frictional unemployment?

Accepted Answer

A)  An increase in the number of high school and college graduates.
B)  An expansion of unemployment compensation benefits.
C)  Effective Internet- based employment services and job registries.
D)  All of the above would decrease frictional unemployment.E) B) and C)
F) A) and C)

Question 18

The employment- to- population ratio equals

Accepted Answer

A)  (labour force) /(working- age population) × 100.
B)  (number of people with full- time jobs) /(labour force) × 100.
C)  (number of people employed) /(labour force) × 100.
D)  (number of people employed) /(working- age population) × 100.E) A) and B)
F) B) and C)

Question 19

Bob inherits a large sum of money from his dead uncle's estate. Bob decides to retire young, so he quits his job and heads to the Bahamas. Bob is an example of

Accepted Answer

A)  cyclical unemployment.
B)  frictional unemployment.
C)  structural unemployment.
D)  None of the above is correct.E) B) and D)
F) None of the above

Question 20

The BEST example of a cyclically unemployed individual is

Accepted Answer

A)  Charles, who lost his job as a real estate salesperson when the housing market went soft because of a recession.
B)  Alice, who quit her job to enter college.
C)  Bob, who has just graduated from college and is entering the labour market.
D)  Mary, who lost her job in the textile industry following a decrease in the tariff on textiles.E) A) and B)
F) B) and C)

Exam 19: Monitoring Jobs and Inflation

During a recession, the ________.

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In an economy, 40 million people are employed, 2 million are unemployed, and 8 million are not in the labour force. What is the labour force participation rate?

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Which of the following means that the CPI overstates the actual inflation rate?

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Frictional unemployment includes

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Suppose the natural unemployment rate equals 6 per cent and the current unemployment rate is 8 per cent. We can conclude that

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Which of the following BEST fits the definition of unemployed?

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Which of the following most likely would decrease frictional unemployment?

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The bias in the CPI typically

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Marginally attached workers fall into which of the following population categories?

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The employment- to- population ratio equals

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Assume the inflation rate falls from 4 per cent to 2 per cent. This means that

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Structural unemployment is the result of

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Which of the following situations BEST describes an individual who is cyclically unemployed?

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The consumer price index (CPI)

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Bob inherits a large sum of money from his dead uncle's estate. Bob decides to retire young, so he quits his job and heads to the Bahamas. Bob is an example of

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If the people who take early retirement are not counted in the working- age population, then

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Suppose the economy is experiencing frictional unemployment of 1 per cent, structural unemployment of 3 per cent and cyclical unemployment of 4 per cent. What is the natural unemployment rate?

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Full employment occurs when the

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The BEST example of a cyclically unemployed individual is

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The labour force is the sum of the

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