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The cost of inflation to society includes


A) unpredictable changes in the value of money.
B) higher interest rates paid by borrowers.
C) higher interest rates paid by the government on its debt.
D) the lost spending when people do not have enough money.

E) A) and D)
F) A) and C)

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The relationship between the unemployment rate and the natural unemployment rate is that the unemployment rate


A) fluctuates about the natural rate.
B) equals the natural rate.
C) is always below the natural rate.
D) is always above the natural rate.

E) A) and D)
F) All of the above

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-The tables above give the purchases of an average consumer in a small economy. (These consumers purchase only shampoo and pizza.) Suppose 2015 is the reference base period. a) What is the cost of the CPI basket in 2015 and 2016? b) What is the CPI in 2015 and in 2016? c) What is the inflation rate between 2015 and 2016? -The tables above give the purchases of an average consumer in a small economy. (These consumers purchase only shampoo and pizza.) Suppose 2015 is the reference base period. a) What is the cost of the CPI basket in 2015 and 2016? b) What is the CPI in 2015 and in 2016? c) What is the inflation rate between 2015 and 2016? -The tables above give the purchases of an average consumer in a small economy. (These consumers purchase only shampoo and pizza.) Suppose 2015 is the reference base period. a) What is the cost of the CPI basket in 2015 and 2016? b) What is the CPI in 2015 and in 2016? c) What is the inflation rate between 2015 and 2016?

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a) For 2015 the CPI basket costs $171.25...

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An observer of the economy notices that over the past 12 months the unemployment rate has fallen from 7.0 percent to 6.5 percent. During the same time, the rate of growth in real GDP has been positive. From this information we might conclude that


A) inflation is not occurring.
B) an expansion is occurring in the economy.
C) a recession is in progress.
D) a trough in the business cycle will soon be reached.

E) A) and D)
F) C) and D)

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If the economy is at full employment


A) the entire population is employed.
B) the entire labor force is employed.
C) the only unemployment is frictional unemployment plus discouraged workers.
D) real GDP equals potential GDP.

E) A) and B)
F) A) and C)

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The CPI is the average price of all goods and services produced within the economy.

A) True
B) False

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Explain the relationship between real GDP and potential GDP and between the unemployment rate and the natural unemployment rate as the economy moves through a business cycle.

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Potential GDP is the level of GDP when t...

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Which of the following statements is INCORRECT?


A) The labor force is equal to the number of people employed plus the number of people unemployed.
B) The working age population includes everyone over the age of 16.
C) The unemployment rate is the number of persons who are unemployed divided by the labor force then times 100.
D) The labor-force participation rate is the labor force divided by the working-age population then times 100.

E) B) and D)
F) A) and B)

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In September 2014, the official U-3 unemployment rate dropped from 6.1 percent to 5.9 percent. This change could have been caused by


A) unemployed workers giving up looking for a job.
B) part-time workers getting a full-time job.
C) full-time workers becoming part-time workers.
D) workers who had previously given up looking for a job starting to look again.

E) A) and B)
F) A) and C)

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The table below shows data regarding Germany's labor market. The table below shows data regarding Germany's labor market. The data show that Germany's unemployment rate between 2007 and 2008 A) increased. B) decreased C) stayed the same. D) cannot be determined because the population decreased. The data show that Germany's unemployment rate between 2007 and 2008


A) increased.
B) decreased
C) stayed the same.
D) cannot be determined because the population decreased.

E) A) and D)
F) C) and D)

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In July 2014, the CPI inflation rate was 0.3 percent while the core CPI inflation rate was 0.1 percent. The difference between these two measurements of inflation indicates


A) prices for food and fuel were increasing more rapidly than prices for other goods.
B) prices for food and fuel were increasing less rapidly than prices for other goods.
C) the underlying inflation rate was higher than the overall inflation rate.
D) a negative underlying inflation rate.

E) None of the above
F) B) and D)

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Using the official measure of unemployment, which of the following would NOT be counted as unemployed?


A) a person who is not working but who has tried to find a job in the past week
B) a person who is waiting to be called back to a job after having been laid off
C) a person who performs traditional housework and does not work outside the home for pay
D) a person who is waiting to start a new job in the next 30 days

E) A) and D)
F) B) and C)

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If the labor force participation rate is rising and the working-age population is not changing, then the


A) size of the labor force is rising.
B) number of unemployed people is rising and the size of the labor force is falling.
C) size of the labor force is falling.
D) number of unemployed people is falling and the size of the labor force is rising.

E) All of the above
F) B) and C)

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Suppose the population is 220 million people, the labor force is 150 million people, the number of people employed is 130 million and the working-age population is 175 million people. What is the unemployment rate?

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The unemployment rat...

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List the four sources of bias in the CPI and briefly explain them.

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There are four potential biases. First i...

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The unemployment rate equals the number of


A) unemployed workers multiplied by 100.
B) unemployed workers divided by the population then multiplied by 100.
C) unemployed workers divided by the number of employed workers then multiplied by 100.
D) unemployed workers divided by the labor force then multiplied by 100.

E) B) and C)
F) None of the above

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Give an example of a structurally unemployed person.

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A person who loses his or her ...

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-The information in the table above gives the 2016 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2017 prices. What is the value of the CPI for the reference base period, 2016? A) 140 B) 133 C) 100 D) 75 -The information in the table above gives the 2016 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2017 prices. What is the value of the CPI for the reference base period, 2016?


A) 140
B) 133
C) 100
D) 75

E) A) and B)
F) B) and C)

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The currently used method for calculating the CPI


A) accounts for people increasing consumption of a good that falls in relative price.
B) probably overstates inflation.
C) has no effect on government expenditures.
D) None of the above answers are correct.

E) B) and D)
F) All of the above

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The table below shows the price index for Zimbabwe starting in 2000. The table below shows the price index for Zimbabwe starting in 2000. www.econstats.com The data show that A) the inflation rate between the base year and 2001 is 73.4 percent. B) new goods bias and quality change bias are responsible for most of Zimbabwe's inflation. C) the inflation rate between 2005 and 2006 was 319.2 percent. D) while Zimbabwe experienced a high price level, it did not experience high inflation. www.econstats.com The data show that


A) the inflation rate between the base year and 2001 is 73.4 percent.
B) new goods bias and quality change bias are responsible for most of Zimbabwe's inflation.
C) the inflation rate between 2005 and 2006 was 319.2 percent.
D) while Zimbabwe experienced a high price level, it did not experience high inflation.

E) A) and C)
F) A) and B)

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