1 Cyclical unemployment is A unemployment caused by time delays in matching available jobs and workers. B unemployment caused by changes in the...

1 Cyclical unemployment is

A unemployment caused by time delays in matching available jobs and workers.

B unemployment caused by changes in the industrial makeup of an economy.

C unemployment caused by economic downturns.

D when workers stop looking for jobs because they feel no jobs are available for them.

E not one of the three types of unemployment.

2 During healthy economic periods, cyclical unemployment

A rises.

B will equal structural unemployment.

C Falls toward zero.

D will equal frictional unemployment.

E will equal the natural rate of unemployment.

3 The big difference between the Great Recession and the recession of 1982 was

A how the economy recovered after the recessions had officially ended.

b the increase in the unemployment rate that occurred during each recession.

c the quarterly real GDP growth rates at the official start of each recession.

d the length of each recession.

e the total decline in the economy during each recession.

4 Holding all else constant, if people who are currently discouraged workers decide to start looking for jobs again, you will see

a an increase in the unemployment rate.

b a decrease in the unemployment rate.

c no effect on the unemployment rate.

d no effect on the labor force participation rate.

e a decrease in the labor force participation rate.

5 Which of the following statements about unemployment is true?

A To be officially unemployed, a person has to be in the labor force.

B A person who is not working is officially unemployed.

C A person who is working part-time but would like to be working full-time is considered to be unemployed.

D A person who is retired and not looking for a job is still considered unemployed.

E A person who is a full-time student and not seeking employment is still considered unemployed.

6 Use the table to answer the following questions:

Group# in Millions

Relevant population215

Employed138

Unemployed   9

According to the table, the labor force is

A 138 million.

B 215 million.

C 77 million.

D 147 million.

E 68 million.

A Since 1948, the labor force participation gap between males and females has decreased.

B Since 1948, the percentage of women participating in the labor force has decreased.

C Since 1948, the percentage of men participating in the labor force has increased.

D Since 1948, the percentage of women participating in the labor force has remained the same.

E Since 1948, the labor force participation gap between males and females has risen.

8 Holding all else constant, if people who are currently unemployed become discouraged workers, you will see

A an increase in the unemployment rate.

B an increase in the labor force participation rate.

C no effect on the unemployment rate.

D no effect on the labor force participation rate.

E a decrease in the labor force participation rate.

9 Which of the following conditions might cause the unemployment rate to be less than the natural rate of unemployment?

A Demand for products starts to decrease, so firms keep their factories open for additional hours of production to make up the difference.

B Demand for products is so high that firms keep their factories open for additional hours of production and pay their workers overtime.

C Demand for products is so high that firms raise their prices to take advantage of extra profits.

D The economy enters a recession, so firms start to produce more to help boost the economy.

E The government decreases unemployment benefits.

10 During healthy economic periods, only ________ unemployment exist(s).

A frictional and structural

B cyclical

C frictional

D structural

E structural and cyclical

11 Refer to the table to answer the following questions:

YearCPI1999 80

2000 87

2001 105

2002 112

2003 108

2004 117

As presented in the table, the rate of inflation from 1999-2000 (i.e., during the year 2000) was (rounded to two decimal places)

7.00 percent.

80.00 percent.

87.00 percent.

8.75 percent.

10.00 percent.

12 It is rare when prices fall in modern times. However, it is likely that they would fall during severe recessions. In what year is this most likely to have occurred?

a 2005

b 2009

c 2011

d 2012

e 2003

13 The concept of a price index is that it is a(n)

a measure of how the items included in the typical basket of goods have changed over time; it also includes price changes over time.

b measure of how the items included in the typical basket of goods have changed over time, while holding price changes constant.

c measure of how the prices included in the typical basket of goods have changed over time, holding the items in the consumption bundle constant.

d index of how much gasoline prices have increased, because all prices follow the price of gasoline.

e index of how much housing prices have changed, because housing is the most important item in the consumption bundle.

14 The chained consumer price index (CPI) tends to more accurately reflect prices by updating the consumer basket of goods

every time any price in the typical consumer basket changes.

A daily.

B weekly.

C monthly.

D annually.

16 If the value of the consumer price index (CPI) in 2013 was 135 and the value of the CPI in 2012 was 117, we could correctly say that the

A typical basket of goods was about 18 percent more expensive in 2013 than in 2012.

B typical basket of goods was about 18 percent less expensive in 2013 than in 2012.

C typical basket of goods was about 15.4 percent more expensive in 2013 than in 2012.

D average price of all items included in gross domestic product (GDP) was about 18 percent more expensive in 2013 than in 2012.

E average price of all items included in gross domestic product (GDP) was about 15.4 percent more expensive in 2013 than in 2012.

F

17 Milton Friedman, who won the Nobel Prize in Economics, characterized inflation as being "high and variable." These characteristics of inflation create problems because

A of future price uncertainty.

B of arbitrage.

C of the signal emissions problem.

D deflation could occur.

E inflation always becomes hyperinflation.

18 Inflation is not a problem

A if it is under 15 percent, as it usually is in the United States.

B if salaries rise at a slower rate than inflation.

C if the prices of some goods fall even though the prices of others might be rising.

D except that when it occurs, it creates uncertainty over future prices (along with other possible deleterious effects).

E and is not preferred when compared to deflation.

19 If a bank expects inflation to increase in the near future, how will it respond?

A It will start paying less interest on deposits.

B It will seek to reduce the amount of cash held in its vaults.

C It will temporarily scale back its efforts to gain new customers.

D It will start charging more interest on loans.

EIt will temporarily suspend withdrawals.

20 If your real wage rose but your nominal wage fell, this would imply that

A inflation is positive but less than the rate of increase in your wage.

B inflation has occurred.

C your boss took some of your wages illegally.

D the overall price level has fallen more than your nominal wage.

E housing prices have fallen, and because you own a house, it reduces the value of your real wage.