Question 1

The producer price index measures what is happening to prices at the wholesale level.

Accepted Answer

The producer price index (PPI) tracks changes in prices of goods sold by producers and manufacturers, which gives an indication of inflation and economic trends at the wholesale level.

Question 2

Deflation means prices are declining and is an indication that economic conditions are deteriorating.

Accepted Answer

Deflation is generally seen as a negative economic indicator because declining prices can lead to decreased consumer spending and business investment, which can fuel a downward economic spiral.

Question 3

As productivity increases, the cost of producing goods and services is likely to fall.

Accepted Answer

When productivity increases, it means that more output is generated with the same amount of input. This can lead to economies of scale and lower unit costs, resulting in a lower overall cost of production.

Question 4

The measurement of total sales volume at all stages of production is called the gross domestic product (GDP).

Accepted Answer

Gross Domestic Product (GDP) measures the value of all finished goods and services produced within a country's borders in a specific time period, not the total sales volume at all stages of production.

Question 5

GDP figures do not include the value of illegal activities.

Accepted Answer

GDP figures only include legal economic activities and do not take into account illegal activities such as drug trafficking or other underground economic transactions.

Question 6

Frictional unemployment occurs because the economy is experiencing a recession.

Accepted Answer

Frictional unemployment occurs due to factors such as individuals voluntarily leaving their jobs to find better opportunities, recent graduates looking for their first jobs, and individuals returning to the workforce after a long absence. It is not directly related to a recession in the economy.

Question 7

Inflation refers to the persistent rise in the purchasing power of money.

Accepted Answer

Inflation refers to the persistent rise in the general price level of goods and services in an economy, which leads to a decrease in the purchasing power of money.

Question 8

To be classified as unemployed, a person must be at least 16 years old and trying to find a job within the past four weeks.

Accepted Answer

This is the definition of unemployment according to the U.S. Bureau of Labor Statistics.

Question 9

Productivity of workers in the U.S. is helped by the use of better machinery.

Accepted Answer

The use of better machinery can improve the efficiency and speed of production, ultimately leading to increased productivity of workers.

Question 10

Inflation refers to a general rise in the prices of goods and services over time.

Accepted Answer

Inflation is defined as a sustained increase in the general price level of goods and services in an economy over a period of time.

Question 11

Structural unemployment refers to unemployment caused by the restructuring of firms or by a mismatch between the skills or location of job seekers and the requirements or location of available jobs.

Accepted Answer

Structural unemployment is caused by changes in the structure of the economy, such as technological advances or changes in consumer preferences, that result in a mismatch between the skills and location of workers and the jobs available. This can lead to unemployment for individuals who cannot find suitable work due to a lack of skills or because they are located in an area without available jobs in their field.

Question 12

Some wages, tax brackets, interest rates, and government benefits are based on the CPI.

Accepted Answer

The CPI (Consumer Price Index) is a measure of inflation and is used to adjust wages, tax brackets, interest rates, and government benefits for inflation. Therefore, many of these things are based on the CPI.

Question 13

Disinflation refers to a situation in which prices continue to rise, but not at the rate they were rising previously.

Accepted Answer

Disinflation refers to a decrease in the rate of inflation, which means that prices continue to rise but at a slower pace than before.

Question 14

Any output produced by U.S. firms is included in the value of U.S. GDP, even if the output was produced in a foreign country.

Accepted Answer

GDP measures the value of goods and services produced within a country's borders; output produced by U.S. firms in foreign countries is not included in U.S. GDP but in the GDP of the country where the production takes place.

Question 15

The consumer price index (CPI) measures what is happening to prices at the wholesale level.

Accepted Answer

The consumer price index (CPI) measures what is happening to prices at the consumer level, not the wholesale level.

Question 16

The CPI measures the pace of inflation or deflation.

Accepted Answer

The CPI (Consumer Price Index) measures the changes in the prices of a basket of goods and services over time. This measurement is used to determine the pace of inflation or deflation in an economy. Therefore, the statement is true.

Question 17

The CPI is based on the prices of a carefully selected market basket of goods, all of which consumers can purchase at a supermarket.

Accepted Answer

The market basket used for the CPI includes a variety of goods and services, not just those found in a supermarket. It includes things like housing, medical care, transportation, and education, in addition to food and beverages.

Question 18

Core inflation figures omit healthcare prices, but not energy prices.

Accepted Answer

Core inflation figures typically exclude food and energy prices, including those of energy, but not healthcare prices, which are usually included.

Question 19

The higher the measurement of productivity, the higher the likely costs of production.

Accepted Answer

This statement is false. Higher productivity can actually lead to lower costs of production because more output is being produced with the same amount of resources, resulting in economies of scale and potentially lower unit costs.

Question 20

An increase in productivity means that a worker is now able to produce more goods and services in the same amount of time.

Accepted Answer

An increase in productivity means that a worker is now able to produce more goods and services in the same amount of time. This is the definition of productivity. Therefore, it is true.

Quiz 2: Understanding Economics and How It Affects Business