ECONOMICS TEST

Exam
Name_________________________ __________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Bob is not considered unemployed if he 1) A) is not working but has looked for a job for the past two months. B) is temporarily laid off. C) is not looking for a job. D) all of the above Answer: C 2) For Joanna to be considered out of the labor force, she can be 2) A) temporarily laid off. B) working only 10 hours per week. C) a full-time student. D) self-employed. Answer: C 3) Matt graduated from college three weeks ago and is currently without work. He accepted a job that
will start in two weeks. Today, Matt is 3) A) a discouraged worker. B) in the labor force. C) not in the labor force. D) employed. Answer: B 4) The number of people employed equals 4) A) the labor force minus the number of people unemployed. B) the number of people unemployed divided by the labor force. C) the number of people unemployed minus the labor force. D) the labor force plus the number of people unemployed. Answer: A 5) Annabel retired from the fire department. She started working an hour or two a day at a paid job in
the local hospital. Annabel is 5) A) unemployed. B) a discouraged worker. C) employed. D) not in the labor force. Answer: C 6) Wayne started looking for another job immediately after he lost his current job. As a result the 6) A) labor force increases. B) unemployment rate increases. C) unemployment rate remains constant. D) labor force decreases. Answer: B
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Refer to the information provided in Table 7.1 below to answer the questions that follow. Table 7.1 Employed 95,000 people Unemployed 5,000 people Not in the Labor Force 80,000 people 7) Refer to Table 7.1. The labor force equals 7) A) 95,000 people. B) 100,000 people. C) 175,000 people. D) 180,000 people. Answer: B 8) Refer to Table 7.1. The unemployment rate is 8) A) 2.8%. B) 5%. C) 5.3%. D) 7.2%. Answer: B 9) Refer to Table 7.1. The labor-force participation rate is approximately 9) A) 12%. B) 56%. C) 80%. D) 95%. Answer: B 10) Refer to Table 7.1. The employment rate is 10) A) 52.8%. B) 62.5%. C) 95.0%. D) 97.2%. Answer: C Refer to the information provided in Table 7.2 below to answer the questions that follow. Table 7.2 Labor force participation rate 60% Total population 16 years of age and older 200 million Unemployment rate 5% 11) Refer to Table 7.2. The labor force 11) A) equals 200 million. B) equals 130 million. C) equals 120 million D) equals 110 million. Answer: C 12) Refer to Table 7.2. The total number of people unemployed is 12) A) 10 million. B) 8 million. C) 6 million. D) 3 million. Answer: C 13) Refer to Table 7.2. The total number of people employed is 13) A) 190 million. B) 120 million. C) 114 million. D) 57 million. Answer: C 14) The unemployment rate is calculated as 14) A) (employed - labor force)/employed × 100. B) (labor force - employed)/labor force × 100. C) (employed - unemployed)/labor force × 100. D) unemployed/population × 100. Answer: B
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15) The number of people classified as employed is 390,000 and the number of people classified as
unemployed is 70,000. The size of the labor force 15) A) equals 320,000. B) equals 390,000. C) equals 460,000. D) equals 480,000. Answer: C 16) The number of people classified as employed is 500,000 and the number of people in the labor force
is 550,000. The total number of people classified as unemployed is 16) A) 11,000. B) 50,000. C) 500,000. D) 550,000. Answer: B 17) If the number of people classified as unemployed is 10,000 and the number of people classified as
employed is 300,000, what is the unemployment rate? 17) A) 3.2% B) 3.0% C) 2.4% D) 1.5% Answer: A 18) If the number of people classified as unemployed is 5,000 and the number of people classified as
employed is 45,000, what is the unemployment rate? 18) A) 4.5% B) 5.0% C) 9.5% D) 10% Answer: D 19) If the number of people employed is 240,000 and the labor force is 250,000, the unemployment rate
is 19) A) 2.4%. B) 2.9%. C) 4.0%. D) 4.7%. Answer: C 20) If the unemployment rate is 7% and the number of people employed is 300,000, total number of
people unemployed is approximately 20) A) 21,000 people. B) 22,580 people. C) 23,330 people. D) 42,050 people. Answer: B 21) If the unemployment rate is 6.2% and the number of people employed is 400,000, the labor force is
approximately 21) A) 402,500 people. B) 426,000 people. C) 431,000 people. D) 464,500 people. Answer: B 22) If the labor force is 575,000 and the total population 16 years of age or older is 650,000, the
labor-force participation rate is 22) A) 65.0%. B) 75.0%. C) 88.5%. D) 92.5%. Answer: C 23) If the labor-force participation rate is 90% and the total population 16 years of age or older is 3 million people, the labor force is 23) A) 2,450,000 people. B) 2,700,000 people. C) 3 ,300,000 people. D) 3,900,000 people. Answer: B 24) If the number of unemployed equals 10,000, the number of employed equals 70,000, and the
number not in the labor force is 20,000, the labor-force participation rate is 24) A) 60%. B) 70%. C) 80%. D) 90%. Answer: C 3
25) If the number of unemployed equals 125,000 and the number of employed equals 275,000, the
labor-force participation rate 25) A) is 31.2%. B) is 68.8%. C) is 75%. D) cannot be determined from this information. Answer: D 26) In the United States in 2010, the highest employment rate is for ________ and the lowest is for
________. 26) A) white males; African-American females B) African-American females; men over 55 C) white females; African-American teenagers D) white males; white females Answer: C 27) When an individual quits his job and decides to look for a new job immediately, the labor-force participation rate 27) A) increases. B) decreases. C) stays the same. D) may increase or decrease, depending on the length of time he/she stays at home. Answer: C 28) Tony has just graduated from college and has now applied for a full time position where he is
currently working part-time. This causes the unemployment rate to ________ and the labor-force participation rate to ________. 28) A) increase; increase B) increase; decrease C) increase; stay the same D) stay the same; stay the same Answer: D 29) If Lola is classified as a discouraged worker, she is 29) A) frictionally unemployed. B) not part of the labor force. C) structurally unemployed. D) part of the labor force. Answer: B 30) In September there are 10,000 people classified as unemployed and the size of the labor force is
400,000. The only change between September and October is that 4,000 of the unemployed give up
looking for work. Which of the following is true? 30) A) In September the unemployment rate was 1.75% and in October the unemployment rate was
0.75%. B) In September the unemployment rate was 4% and in October the unemployment rate was 1%. C) In September the unemployment rate was 5% and in October the unemployment rate was 4%. D) In September the unemployment rate was 2.5% and in October the unemployment rate was
1.5%. Answer: D
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31) When 100 people who had previously stopped looking for jobs now decide to look for jobs, the 31) A) unemployment rate decreases. B) size of the labor force increases. C) unemployment rate does not change. D) labor-force participation rate does not change. Answer: B 32) By classifying discouraged workers as out of the labor force, the unemployment rate is ________ if
they were considered as employed. 32) A) the same as B) higher than C) lower than D) any of the above can be correct. Answer: C 33) The labor force participation rate is the 33) A) ratio of the labor force to the total population 16 years old or older. B) the number of people in the labor force minus the number of people who are unemployed. C) ratio of the number of employed people to the number of unemployed people. D) total number of people who are participating in the labor force. Answer: A 34) Which of the following groups over 19 years of age had the highest unemployment rate in the
United States in 2010? 34) A) white males B) African American females C) white females D) African American males Answer: D 35) Which of the following statements is NOT true? 35) A) The unemployment rate does not tell us anything about the duration of unemployment. B) The duration of unemployment increases during economic expansions. C) The unemployment rate plus the employment rate equals 100% of the labor force. D) The duration of unemployment increases during recessions. Answer: B 36) In which of the following years was the U.S. unemployment rate the highest? 36) A) 1960 B) 2010 C) 1990 D) 1982 Answer: D 37) The Full Employment and balanced Growth Act of 1978 formally established a specific
unemployment target for the economy of 37) A) 2%. B) 4%. C) 6%. D) 8%. Answer: B 38) When a radiologist quits her job at a hospital and starts looking for a better job in another hospital,
she is 38) A) structurally unemployed. B) frictionally unemployed. C) cyclically unemployed. D) seasonally unemployed. Answer: B
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39) Unemployment that occurs during the normal workings of an economy as people change jobs and
move across the country is called 39) A) structural unemployment. B) cyclical unemployment. C) natural unemployment. D) frictional unemployment. Answer: D 40) If Samantha quits her job voluntarily and actively searches for other work, then she is considered 40) A) structurally unemployed. B) not to be unemployed. C) frictionally unemployed. D) cyclically unemployed. Answer: C 41) When the Fed increases the rate of growth of the money supply to jump start the economy, the
unemployment type that will be directly affected is the 41) A) structural unemployment. B) natural rate of unemployment. C) frictional unemployment. D) cyclical unemployment. Answer: D 42) Telephone operators who have lost their jobs as a result of computerized switchboards are an
example of 42) A) cyclical unemployment. B) structural unemployment. C) voluntary unemployment. D) frictional unemployment. Answer: B 43) The portion of unemployment that is due to changes in the structure of the economy that result in a
significant loss of jobs in certain industries is ________ unemployment. 43) A) structural B) frictional C) cyclical D) seasonal Answer: A 44) A customer service representative in Nebraska who loses his job because the company relocated the
customer service department to India represents an example of 44) A) structural unemployment. B) cyclical unemployment. C) frictional unemployment. D) seasonal unemployment. Answer: A 45) A bank moves its headquarters from Pennsylvania to Arkansas. The CFO of the bank is given the
opportunity to move to Arkansas. He turns down this opportunity because of family obligations.
While he is searching for a new job he would be classified as 45) A) frictionally unemployed. B) not in the labor force because he turned down the opportunity to relocate. C) cyclically unemployed. D) structurally unemployed. Answer: D 46) A structurally unemployed person is 46) A) an individual who cannot find a job because his or her job skills have become obsolete. B) an individual who cannot find a job because of a recession. C) an individual who is switching jobs within the same industry. D) not counted as part of the labor force. Answer: A
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47) The sum of frictional unemployment and structural unemployment is 47) A) the natural rate of unemployment. B) seasonal unemployment. C) the size of the labor force. D) cyclical unemployment. Answer: A 48) The natural rate of unemployment is the sum of 48) A) cyclical and frictional unemployment. B) cyclical, structural and frictional unemployment. C) frictional and structural unemployment. D) structural and cyclical unemployment. Answer: C 49) Estimates for the natural rate of unemployment in the United States range from 49) A) 6% to 9%. B) 2% to 12%. C) 4% to 6%. D) 1% to 3%. Answer: C 50) If the labor market becomes less efficient so that the unemployed are more slowly matched with
jobs, then 50) A) the natural rate of unemployment will not change. B) the natural rate of unemployment will increase. C) the natural rate of unemployment will decrease. D) the natural rate of unemployment could either increase or decrease. Answer: B 51) During the early 1980s, companies started expanding. One of the results of this expansion was the
long-term increase in the number of middle management positions. This change in the way businesses operate would have 51) A) not affected the natural rate of unemployment. B) increased the natural rate of unemployment. C) decreased the natural rate of unemployment. D) either increased or decreased the natural rate of unemployment. Answer: C 52) The ________ in unemployment that occurs during recessions and depressions is called ________
unemployment. 52) A) increase; cyclical B) decrease; structural C) increase; frictional D) increase; natural Answer: A 53) The unemployment that occurs during recessions and depressions is 53) A) structural unemployment. B) cyclical unemployment. C) frictional unemployment. D) the natural rate of unemployment. Answer: B 54) The demand for automobiles falls when the economy experiences a recession. If an automobile
manufacturer lays off workers during a recession, this would be an example of 54) A) frictional unemployment. B) cyclical unemployment. C) natural unemployment. D) structural unemployment. Answer: B
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55) The economy is in a recession and the new car market is in a slump. As a result of this, a Chevrolet
dealership lays off half of its sales force. This is an example of 55) A) frictional unemployment. B) structural unemployment. C) natural unemployment. D) cyclical unemployment. Answer: D 56) During the recession of 2008-2009, cyclical unemployment increased as the recession continued. This increase in cyclical unemployment would have 56) A) had no effect on the natural rate of unemployment. B) decreased the natural rate of unemployment. C) increased the natural rate of unemployment. D) either increased or decreased the natural rate of unemployment. Answer: A 57) During the Great Depression, ________ fell by approximately 30% and the ________ rose to about
25%. 57) A) exports; imports B) prices; employment rate C) the unemployment rate; inflation rate D) real output; unemployment rate Answer: D 58) During a recession 58) A) consumption tends to rise. B) exports tend to fall. C) investment tends to fall. D) imports tend to rise. Answer: C 59) Which of the following is a cost associated with recessions and unemployment? 59) A) the psychological harm done to the unemployed B) worsening of the nation's balance of payments C) increased output in the future D) increased real output Answer: A 60) Related to the Economics in Practice on p. 445: In the U.S. from 1955 to 1996, the labor force participation rate increased for ________ and decreased for ________. 60) A) women; men B) men; women C) white men; African American men D) African American women; white women Answer: A 61) Related to the Economics in Practice on p. 445: If the number of women entering the labor force is equal to the number of men leaving the labor force, the labor force participation rate will, ceteris paribus, 61) A) not change. B) decrease. C) increase. D) drop to zero. Answer: A TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 62) When more people who are not working start looking for jobs, the labor-force participation rate decreases. 62) Answer: True False 8
63) An decrease in search costs will decrease cyclical unemployment. 63) Answer: True False 64) The natural rate of unemployment is cyclical plus frictional unemployment. 64) Answer: True False 65) Anyone 16 years of age or older who is not classified as employed is still a member of the labor
force. 65) Answer: True False 66) If discouraged workers were counted as unemployed, the measured unemployment rate would
increase. 66) Answer: True False 67) An unemployment rate of 10% means that the employment rate is 90%. 67) Answer: True False 68) If labor markets were perfectly efficient, the employment rate would rise to 100%. 68) Answer: True False 69) The natural rate of unemployment varies based on inflation rates. 69) Answer: True False MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 70) In which of the following conditions is the inflation rate likely to rise and the unemployment rate
likely to fall? 70) A) hyperinflation B) stagflation C) recession D) boom Answer: D 71) Which of the following statements is NOT true? 71) A) Recessions are a very good way to improve the nation's balance of payments. B) The costs of recessions are not distributed equally among all groups of the population. C) Recessions may increase efficiency by driving the least efficient firms in the economy out of
business. D) Recessions tend to increase the demand for imports and therefore improve the nation's
balance of payments. Answer: D 72) An economic recession tends to ________ the demand for imports, which ________ a nation's
balance of payments. 72) A) increase; improves B) reduce; worsens C) reduce; improves D) increase; worsens Answer: C 73) Hurricane Katrina caused the price of oil to increase. This is an example of 73) A) deflation. B) inflation. C) the operations of supply and demand. D) a sustained inflation. Answer: C
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74) The increase in the demand for hybrid vehicles caused manufacturers of hybrid vehicles to increase
prices by 20%. This is an example of 74) A) the operations of supply and demand. B) a sustained inflation. C) inflation. D) deflation. Answer: A 75) Deflation is an decrease in 75) A) the overall price level. B) the average income level. C) real gross national product. D) the price of one item. Answer: A 76) A decrease in the overall price level is 76) A) a recession. B) a price index. C) deflation. D) inflation. Answer: C 77) An increase in the overall price level is 77) A) a depression. B) a recession. C) inflation. D) deflation. Answer: C 78) Sustained inflation is 78) A) also called stagflation. B) an increase in the overall price level that continues over a significant period of time. C) a constant increase in the price of one product or service in the economy. D) the same as hyperinflation. Answer: B 79) A measurement showing how the average price of a bundle of goods changes over time is a 79) A) sticky price. B) price index. C) real price. D) nominal price. Answer: B Refer to the information provided in Table 7.3 below to answer the questions that follow. Table 7.3 Price per Unit in Units Purchased 2007 2008 2009 2010 Blueberries 8 $2.00 $2.00 $2.10 $2.40 Pineapples 5 $2.00 $2.50 $2.50 $3.00 Cheese 3 $2.50 $3.00 $3.50 $4.00 80) Refer to Table 7.3. Suppose 2009 is the base year. The price index in 2008 is 80) A) 94.2. B) 97.4. C) 106.1. D) 123.0. Answer: A 81) Refer to Table 7.3. If 2009 is the base year, the price index in 2007 is 81) A) 75.4. B) 84.2. C) 118.8. D) 133.5. Answer: B 82) Refer to Table 7.3. If 2009 is the base year, the price index in 2009 is 82) A) 1000. B) 100. C) 10. D) 1 . Answer: B 10
83) Refer to Table 7.3 If 2009 is the base year, the price index in 2010 is 83) A) 86.1. B) 93.6. C) 106.4. D) 116.1. Answer: D 84) Refer to Table 7.3. If 2009 is the base year, the inflation rate between 2008 and 2009 is 84) A) 4.0%. B) 5.8%. C) 6.2%. D) 9.4%. Answer: C 85) Refer to Table 7.3. If 2009 is the base year, the inflation rate between 2008 and 2009 is ________ %,
and the inflation rate between 2009 and 2010 is ________ %. 85) A) 5.8; 5.8 B) 6.2; 16.1 C) 9.4; 11.2 D) 4.0; 4.9 Answer: B 86) Refer to Table 7.3. The highest inflation rate is between the years 86) A) 2007 and 2008. B) 2008 and 2009. C) 2009 and 2010. D) cannot be determined from the given information Answer: C Refer to the information provided in Table 7.4 below to answer the questions that follow. Table 7.4 Units Purchased 2008 Price per Unit in 2009 2010 Good A 5 $1.00 $1.50 $1.50 Good B 10 $2.00 $2.50 $3.00 Good C 4 $4.00 $4.50 $5.00 87) Refer to Table 7.4. The bundle price for the goods in period 2009 is 87) A) $100. B) $57.50. C) $50.50. D) $41.00. Answer: C 88) Refer to Table 7.4. If 2009 is the base period, the price index in 2008 is 88) A) 81.2. B) 86.8. C) 118.8. D) 123.2. Answer: A 89) Refer to Table 7.4. If 2009 is the base year, the price index in 2009 is 89) A) 1000. B) 100. C) 10. D) 1 . Answer: B 90) Refer to Table 7.4. If 2009 is the base year, the price index in 2010 is 90) A) 86.1. B) 87.8. C) 112.2. D) 113.9. Answer: D 91) Refer to Table 7.4. If 2009 is the base year, the inflation rate between 2008 and 2009 is 91) A) 23.2%. B) 20.4%. C) 18.8%. D) 14.1%. Answer: A
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92) Refer to Table 7.4. If 2009 is the base year, the inflation rate between 2009 and 2010 is 92) A) 13.9%. B) 12.2%. C) 9.4%. D) 7.0%. Answer: A 93) Refer to Table 7.4. If 2008 is the base year, the inflation rate between 2008 and 2009 is 93) A) 7.9%. B) 12.0%. C) 15.4%. D) 23.2%. Answer: D 94) If period 1 is the base year, the bundle price of goods in period 1 is $200, and the bundle price of
goods in period 2 is $240, the period 2 price index is 94) A) 80.0. B) 83.3. C) 116.7. D) 120.0. Answer: D 95) If 2009 is the base year, the bundle price of goods in 2009 is $750, and the bundle price of goods in
2010 is $1,000, the 2010 price index is 95) A) 75. B) 125. C) 133.3. D) 166.7. Answer: C 96) If the price index in period 2 is 105 and the price index in period 3 is 122, the rate of inflation
between period 2 and period 3 is 96) A) 11.6%. B) 12.9%. C) 16.2%. D) 17.0%. Answer: C 97) If 2009 is the base year and the inflation rate between 2009 and 2010 is 5.2%, the price index in 2010
is 97) A) 52.0. B) 100.52. C) 102.50. D) 105.20. Answer: D 98) If 2009 is the base year and the inflation rate between 2009 and 2010 is 7.1, the price index in 2010 is 98) A) 171. B) 107.1. C) 92.9. D) 1.09. Answer: C 99) If the price index in 2009 is 132 and the price index in 2010 is 114, the rate of inflation between 2009
and 2010 is 99) A) -13.6%. B) -5.8%. C) 6.4%. D) 15.8%. Answer: A 100) The consumer price index is the index most often used to measure 100) A) unemployment. B) the labor force. C) per capita income. D) inflation. Answer: D 101) If the CPI in 2009 was 104.5 and the CPI in 2010 was 110.5, then the rate of inflation between 2009
and 2010 was 101) A) 5.4%. B) 5.7%. C) 6.5%. D) 7.0%. Answer: B
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102) If the CPI in 2009 was 112 and the CPI in 2010 was 116, then the rate of inflation between 2009 and
2010 was 102) A) 4.00%. B) 3.64%. C) 3.57%. D) 3.45%. Answer: C 103) If the CPI in period 1 is 125 and the CPI in period 2 is 150, then the rate of inflation between period
1 and period 2 is 103) A) 20%. B) 25%. C) 30%. D) 50%. Answer: A 104) The CPI in period 1 is 200 and the CPI in period 2 is 150. The rate of inflation between period 1 and
period 2 is 104) A) 75%. B) -25%. C) -50%. D) -75%. Answer: B 105) Which of the following statements is TRUE? 105) A) The producer price index is considered to be a leading indicator of future inflation rates. B) The consumer price index somewhat understates changes in the cost of living. C) The best overall indicator of inflationary pressures in the economy is the CPI. D) One benefit with any fixed-bundle index as a measure of the cost of living is that it does not account for substitutions that consumers might make in response to price changes. Answer: A 106) The PPI is a price index that tends to be a leading indicator of 106) A) unemployment trends. B) nominal GDP. C) past economic performance. D) future inflation rates. Answer: D 107) The GDP deflator is the 107) A) broadest-based price index available. B) price index used for the wholesale market. C) index used to measure deflation but not inflation. D) difference between GDP and national income. Answer: A 108) Most economists consider the GDP deflator as ________ of inflationary pressures in the economy. 108) A) the least accurate measure B) only valid as a wholesale price measure C) an overvalued measure D) the best overall indicator Answer: D 109) Which of the following statements is TRUE? 109) A) Everyone in society benefits from inflation. B) Those individuals receiving welfare benefits have been harmed by inflation because increases
in welfare payments have not kept pace with inflation. C) Inflation will have no effect on an individual whose income is indexed to the inflation rate. D) An individual living on a fixed income is always made better off as a result of deflation. Answer: B
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110) The real interest rate is the difference between ________ and ________. 110) A) nominal interest rate; depreciation B) inflation rate; GDP deflator C) the interest rate on a loan; the inflation rate D) frictional inflation rate; structural inflation rate Answer: C 111) Which of the following decreases the real interest rate? 111) A) a decrease in both the nominal interest rate and the inflation rate by the same percentage
points B) an increase in the nominal interest rate, holding the inflation rate constant C) an increase in the inflation rate, holding the nominal interest rate constant D) an increase in both the nominal interest rate and the inflation rate by the same percentage
points Answer: C 112) If Homer is paid an interest rate of 2% on his savings, but the inflation rate is 12%, the real interest
rate Homer earns is 112) A) -12%. B) -10%. C) 2%. D) 14%. Answer: B 113) You want to make a 10% real return on a loan that you are planning to make, and the expected
inflation rate during the period of the loan is 10%. You should charge a nominal interest rate of 113) A) 0%. B) 5%. C) 10%. D) 20%. Answer: D 114) Celia wants to make an 8% real return on a loan that she is planning to make, and the expected
inflation rate during the period of the loan is 5%. She should charge an interest rate of 114) A) 3%. B) 5%. C) 8%. D) 13%. Answer: D 115) If the inflation rate is larger than the nominal interest rate, the real interest rate is 115) A) positive. B) zero. C) negative. D) either positive or zero. Answer: C 116) Drew wants to borrow $500 from Bob. Bob wants to make 4% real return on his money, so they
both agree on an 4% interest rate paid next year. Both don't anticipate the -5% inflation next year. In this case 116) A) Drew will pay an 13% nominal interest rate. B) Drew will pay an 4% real interest rate. C) Bob is better off. D) all of the above Answer: C
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117) Julio borrows $250 from Ricky. Ricky wants to make a 5% real return on his money, so they both
agree on a 5% interest rate paid next year. Both don't anticipate the 5% inflation next year. In this
case 117) A) Julio will pay $15 a year from now on. B) Ricky will receive more than 5% of real rate of return a year from now. C) Julio is better off. D) Ricky is better off. Answer: C 118) Which of the following is a cost of unanticipated inflation? 118) A) Debtors are made worse off. B) The degree of risk associated with investments in the economy decreases. C) Both debtors and creditors are made worse off. D) Creditors are made worse off. Answer: D 119) Stopping inflation by inducing a recession 119) A) generates costs to society due to the recession. B) can only benefit the economy, because the price level will be reduced. C) will always outweigh the costs of the recession. D) both A and C Answer: A 120) Which of the following statements is TRUE? 120) A) Inflation that is higher than expected benefits creditors, and inflation that is lower than
expected benefits debtors. B) When unanticipated inflation occurs regularly, the degree of risk associated with investments
in the economy decreases. C) Whether you gain or lose during a period of inflation depends on whether your income rises
faster or slower than the prices of the things you buy. D) There are no costs or losses associated with anticipated inflation. Answer: C 121) When anticipated inflation occurs regularly, the degree of risk associated with investments in the
economy 121) A) increases. B) remains stable. C) decreases. D) falls to zero. Answer: B 122) A recession ________ output in the future and inflation ________ output in the future. 122) A) may reduce; may reduce B) will reduce; will not affect C) may reduce; will increase D) will reduce; will reduce Answer: A 123) Related to the Economics in Practice on p. 450: The Consumer Price Index in the United States was 207.3 in 2007, 215.3 in 2008 and 214.5 in 2009. If a retiree's pension is tied to the CPI, his monthly
pension check would have increased from ________, and decreased from ________. 123) A) 2007 to 2008; 2007 to 2009 B) 2007 to 2009; 2007 to 2008 C) 2007 to 2008; 2008 to 2009 D) 2008 to 2009; 2007 to 2008 Answer: C
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124) Related to the Economics in Practice on p. 450: The Consumer Price Index in the United States was 215.3 in 2008 and 214.5 in 2009. If a retiree received a monthly pension check of $4,500.00 in 2008
and her pension is tied to the CPI, how much would her monthly pension check be in 2009? 124) A) $4,464.00 B) $4,483.28 C) $4,500.00 D) $4,714.50 Answer: B TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 125) The CPI somewhat understates changes in the cost of living because it does not allow for
substitutions that consumers might make in response to price changes. 125) Answer: True False 126) A 100% increase in the price of salt changes the CPI less than a 10% increase in rent. 126) Answer: True False 127) An inflation rate that is lower than expected benefits debtors. 127) Answer: True False 128) There are costs associated with inflation, even if the inflation rate is perfectly anticipated. 128) Answer: True False 129) The actual real rate of interest is the nominal rate plus the actual inflation rate. 129) Answer: True False MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 130) We can safely say that total output can decrease if there is a(n) 130) A) decrease in the number of workers per machine. B) increase in the size of the labor force and an increase in the productivity of workers. C) increase in the number of machines per worker. D) increase in the size of capital and an increase in the productivity of machines. Answer: A 131) The per-hour output produced by a worker describes the 131) A) nominal worker growth standard. B) productivity of workers. C) labor force participation rate. D) capital per worker ratio. Answer: B 132) The number of tools or machines each worker has to work with measures the 132) A) average wage rate of workers. B) capital per worker ratio. C) labor force participation rate. D) productivity of workers. Answer: B 133) The ratio of total output to the total number of worker hours measures 133) A) labor force participation. B) productivity. C) the ratio of labor cost to total cost. D) capital per worker. Answer: B
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134) For the 1952-2010 period in the United States, productivity 134) A) showed the largest increase during the 1980s. B) fluctuated in the short run around an upward trend. C) increased at a constant rate. D) decreased during the 1960s. Answer: B 135) Which of the following best explains the growth in output per worker hour during the 20th
century? 135) A) the quality of labor declined during that period B) the quality of capital improved during that period C) the worker capital ratio increased during that period D) the quantity of labor increased during that period Answer: B 136) Which of the following is a desirable feature in an economy? 136) A) rapid increase in output per worker B) low unemployment C) low inflation D) all of the above Answer: D 137) Which of the following is a desirable characteristic in an economy? 137) A) low employment B) high unemployment C) rapid increase in the general price level D) low inflation Answer: D 138) Which of the following is NOT a desirable characteristic in an economy? 138) A) population growing slower than output B) low unemployment C) growing per-capita output D) rapid increase in the general price level Answer: D 139) Which of the following is NOT a desirable characteristic in an economy? 139) A) growing per-capita output B) low inflation C) population increasing faster than output D) low unemployment Answer: C 140) Output in an economy can be decreased by 140) A) limiting the work week. B) adding more workers. C) using more machines. D) all of the above Answer: A 141) In economics, the mental or physical skills people have is called 141) A) external education. B) human capital. C) intuition. D) personal investment. Answer: B 142) U.S. productivity grew the fastest in which of the following decades? 142) A) 1960s B) 1970s C) 1980s D) 1990s Answer: A
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143) A depression is 143) A) a general increase in the price level. B) a prolonged and deep recession. C) deflation with economic growth. D) most common in an expansionary economy. Answer: B 144) Which of the following is NOT considered economic capital? 144) A) a factory a company builds to produce other output B) the knowledge an individual acquires through education C) a tractor produced by John Deere D) 1,000 U.S. dollars Answer: D TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 145) The only source of economic growth is technological advancement. 145) Answer: True False 146) Labor productivity is total output multiplied by the total number of worker hours. 146) Answer: True False 147) Workers who take a job related training course are limiting their human capital. 147) Answer: True False 148) If the population is growing faster the economy, then per-capita output is falling. 148) Answer: True False 149) If more workers have less capital to work with, then production will increase. 149) Answer: True False 150) Productivity is output per worker divided by the labor force. 150) Answer: True False 18