Question 1

Jennifer did not work during college. She just obtained a bachelor's degree in marketing, and is now looking for a marketing job in the retail industry. Jennifer is considered

Accepted Answer

Jennifer is frictionally unemployed because she is currently looking for a job after completing her education. She is in the process of searching for a suitable job and is taking time to find the right fit, hence she is considered frictionally unemployed.

Question 2

Which of the following is NOT generally considered a problem with using the consumer price index to measure consumer prices?

Accepted Answer

The consumer price index (CPI) is widely used to adjust federal benefits and income tax rates for inflation, which is not considered a problem with the CPI. Instead, it's a way to ensure that these benefits and taxes keep pace with the cost of living. The other options (A, C, D) highlight recognized issues with the CPI, such as excluding public goods, difficulty accounting for quality improvements, and overlooking new products.

Question 3

Underemployed workers have the desire and ability to contribute significantly more to GDP but cannot do so in their present job.

Accepted Answer

Underemployed workers often possess skills and education that are not being fully utilized in their current job. If they were able to find a job that fully utilized their skills and education, they could contribute more to GDP.

Question 4

Tom is living with his parents. He looks at the help-wanted ads but has not replied to any in the past four weeks. Tom is

Accepted Answer

Tom is not currently seeking employment, so he is not considered part of the labor force. He could still be classified as unemployed if he is actively searching for work, but since he has not replied to any job ads, he is not considered unemployed either.

Question 5

The consumer price index measures both private goods and services and public goods and services.

Accepted Answer

The Consumer Price Index (CPI) primarily measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, focusing on private goods and services. Public goods and services, which are provided by the government and not sold in the market, are generally not included in the CPI.

Question 6

Which statement is NOT true?

Accepted Answer

The consumer price index (CPI) is often used as an indicator to measure inflation, but it is not a true cost-of-living index. A cost-of-living index would measure changes over time in the amount that consumers need to spend to reach a certain utility level or standard of living. The CPI, however, measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, which does not fully capture all aspects of the cost of living.

Question 7

Which of these pairs is NOT synonymous?

Accepted Answer

Cyclical unemployment is the deviation from the natural rate of unemployment and full employment. Therefore, it is not synonymous with full employment.

Question 8

If the labor force is 20 million people and the total employed is 18 million, what is the unemployment rate?

Accepted Answer

The unemployment rate is the percentage of the labor force that is unemployed. 
Unemployment rate = (unemployed/labor force) x 100%
In this situation, the labor force is 20 million and the total employment is 18 million. 
Therefore, the number of unemployed people is 20 million - 18 million = 2 million. 
The unemployment rate = (2 million/20 million) x 100% = 10%. 
Therefore, the answer is B.

Question 9

An economy has 100,000 residents. There are 46,000 people with full-time jobs, 14,000 people with part-time jobs, and 4,000 unemployed people who are actively looking for work. The unemployment rate for this economy is 6.3%.

Accepted Answer

The unemployment rate is calculated as the number of unemployed people divided by the total labor force (the number of people with full-time jobs, part-time jobs, and unemployed people who are actively looking for work). In this case, the unemployment rate is 4,000 / (46,000 + 14,000 + 4,000) = 6.3%.

Question 10

In the 1960s, macroeconomists thought policymakers faced a menu of choices concerning the unemployment rate and the economic growth rate.

Accepted Answer

In the 1960s, macroeconomists believed policymakers faced a trade-off between unemployment and inflation, not economic growth, as described by the Phillips Curve.

Question 11

The GDP deflator for the base year is

Accepted Answer

The GDP deflator for the base year is always equal to 100, by definition. This is because it is calculated as nominal GDP divided by real GDP, and in the base year, nominal and real GDP are by definition equal (since the prices and quantities of goods and services in the base year are used as the basis for comparison). Therefore, the ratio of nominal to real GDP is always 1, or 100 as a percentage.

Question 12

In the United States, people are not counted as employed if they have a job but are on maternity or paternity leave.

Accepted Answer

In the United States, people are counted as employed if they have a job but are on maternity or paternity leave. They are considered as temporarily absent from work.

Question 13

The consumer price index does NOT include

Accepted Answer

The consumer price index (CPI) measures the average change over time in the prices paid by households for a basket of goods and services. This basket includes items such as food, housing, clothing, transportation, and medical care. While property taxes are a cost that households may incur, they are not included in the CPI calculation as they are not a direct payment for goods or services. Therefore, choice B is the correct answer.

Question 14

The consumer price index measures the average change in prices received by domestic producers for their output.

Accepted Answer

The consumer price index measures the average change in prices paid by consumers for a basket of goods and services. It is not directly related to the prices received by domestic producers.

Question 15

Which of these would NOT cause inflation in the United States?

Accepted Answer

Running a budget surplus means that the government is collecting more revenue than it is spending. This would lead to a decrease in the money supply, which would actually cause deflation rather than inflation. The other options (A, B, and C) could all potentially lead to inflation as they can cause a decrease in the supply of goods, leading to an increase in prices.

Question 16

If inflation is unanticipated, then income may be redistributed from creditors to debtors.

Accepted Answer

If inflation is unanticipated, it can erode the real value of debts owed by borrowers, leading to a transfer of wealth from lenders/creditors to borrowers/debtors. This is because borrowers can pay off their debts with less valuable currency. As a result, debtors may gain at the expense of creditors.

Question 17

To keep prices steady, the rate of growth of the money supply should

Accepted Answer

To maintain stable prices, the growth rate of the money supply should match the growth rate of goods and services in the economy. This balance helps prevent inflation or deflation.

Question 18

The natural rate of employment

Accepted Answer

The natural rate of employment is associated with the non-accelerating inflation rate of unemployment (NAIRU), where inflation expectations match the actual inflation rate, indicating no upward or downward pressure on inflation.

Question 19

Jordan Meadows lost his job as an airline pilot and has not been able to find another job as a pilot. Since he is old enough to be eligible for his pension, he decides to retire and devote himself to caring for his elderly parents. According to the Bureau of Labor Statistics, Jordan is

Accepted Answer

Jordan is not actively seeking employment and has retired to care for his parents, so he is considered to be out of the labor force.

Question 20

Which group is helped by inflation?

Accepted Answer

Debtors benefit from inflation because the value of money decreases, making it easier for them to pay back loans with less valuable money.

Quiz 6: Measuring Inflation and Unemployment