Chapter 5/6/7 Questions
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The working-age population is defined as the number of
people over the age of 16 who are not in jail, hospital, or other institution.
people looking for work.
people who have a job.
people working full-time jobs who are over the age of 16.
people over the age of 16 who are not in jail, hospital, or other institution.
Full-time students and prisoners are
counted as unemployed.
counted as discouraged workers.
in the labor force.
not in the labor force.
not in the labor force.
Which of the following is NOT considered to be in the labor force?
a person who is waiting to start a new job in the next 30 days
a person who is not working and who has not tried to find a job
a student who works part-time
a person who is not working but who has tried to find a job in the past week
a person who is not working and who has not tried to find a job
The unemployment rate is the ________ who are unemployed.
percentage of the working-age population
number of people in the labor force
percentage of people in the labor force
percentage of people in the country
percentage of people in the labor force
The percentage of people employed aged 16 years and older divided by the working-age population is known as the
working-age population ratio.
employment-to-population ratio.
labor force participation rate.
employment rate.
employment-to-population ratio.
Who of the following is counted as unemployed?
Rene, a retired chemist
Homer, a full-time student at a vocational school
Glenn, a student who just graduated from college last week and is currently looking for a job
Kim, a worker on strike from her company for a week
Glenn, a student who just graduated from college last week and is currently looking for a job
Suppose that Matt quits a job with the XYZ Corporation in order to look for more rewarding employment. Matt is best be considered as
still being employed.
included in the economy's "hidden employment."
cyclically unemployed.
frictionally unemployed.
frictionally unemployed.
The best example of a cyclically unemployed individual is
Mary who lost her job in the textile industry following a decrease in the tariff on textiles.
Bob who has just graduated from college and is entering the labor market.
Charles who lost his job as a real estate salesperson when the housing market went soft because of a recession.
Alice who quit her job to enter college.
Charles who lost his job as a real estate salesperson when the housing market went soft because of a recession.
Full employment occurs when
frictional unemployment is zero.
cyclical unemployment is zero.
structural unemployment is zero.
cyclical and frictional unemployment are zero.
cyclical unemployment is zero.
The economy is at full employment when
there are fewer unemployed workers than available jobs.
all unemployment is frictional or structural.
there are no unemployed workers.
all unemployment is cyclical.
all unemployment is frictional or structural.
The unemployment rate generally falls during ________ in the business cycle.
a trough
an expansion
a peak
a recession
an expansion
The cost of inflation to society includes
I. | the opportunity costs of resources used by people to protect themselves against inflation. |
II. | the diversion of productive resources to forecasting inflation. |
II only
neither I nor II
I only
both I and II
both I and II
In a period of rapid, unexpected inflation, resources can be lost
Both answers when firms use resources to forecast inflation and because rapid inflation almost always turns into a hyperinflation0 are correct.
because rapid inflation almost always turns into a hyperinflation.
when firms use resources to forecast inflation.
when firms invest in research and development instead of forecasting inflation.
when firms use resources to forecast inflation.
Hyperinflation is defined as
very low inflation rates.
very high inflation rates.
declining inflation rates.
rising but low inflation rates.
very high inflation rates.
If the CPI for this year is 220 and the CPI for last year was 215, the inflation rate is
just over 2 percent.
just over 5 percent.
5 percent.
10 percent.
just over 2 percent.
The currently used method for calculating the CPI
probably overstates inflation.
has no effect on government expenditures.
None of these answers are correct.
accounts for people increasing consumption of a good that falls in relative price.
probably overstates inflation.
a sustained expansion of production goods over a given period.
a sustained expansion of consumption goods over a given period.
a sustained expansion of production possibilities measured as the increase in real GDP over a given period.
a sustained expansion of production possibilities measured as the increase in nominal GDP over a given period.
a sustained expansion of production possibilities measured as the increase in real GDP over a given period.
We are interested in long-term growth primarily because it brings
higher standards of living.
higher price levels.
trade wars with our trading partners.
lower price levels.
higher standards of living.
The Rule of 70 is used to
calculate the economy's growth rate.
estimate how long it will take the level of any variable to double.
calculate the standard of living.
estimate how much of an economy's growth rate is due to increases in capital per hour of labor.
estimate how long it will take the level of any variable to double.
Using the Rule of 70, if China's current growth rate of real GDP per person was 7 percent a year, how long would it take the country's real GDP per person to double?
49 years
35 years
14 years
10 years
10 years
A country in which real GDP per person has grown more slowly than the United States since 1980 would be
Taiwan.
Hong Kong.
Mexico.
Singapore.
Mexico.
Over the last 120 years, the average U.S. growth rate in real GDP per person was about
2 percent per year.
12.5 percent per year.
6 percent per year.
1 percent per year.
2 percent per year.
The real wage rate measures the
dollar value of what a worker could earn in another job.
average weekly earnings in dollars of a worker.
quantity of goods and services that an hour of work will buy.
dollar value of an hour of work.
quantity of goods and services that an hour of work will buy.
Because the productivity of labor decreases as the quantity of labor employed increases
the aggregate production function shifts upward as the real wage rate decreases.
the quantity of labor a firm demands increases as the real wage rate decreases.
the labor demand curve shifts right as the real wage rate decreases.
the quantity of labor a firm demands increases as the money wage rate decreases.
the labor demand curve shifts right as the real wage rate decreases.
Which of the following is TRUE regarding the labor market?
I. | The labor supply curve slopes upward because firms maximize profits as they hire more |
workers.
II. | If the real wage rate falls, the quantity of labor firms demand increases. |
III. | The demand for labor curve slopes downward because as the real wage rate falls, workers |
demand to work fewer hours.
I, II and III
I and II
II only
I and III
II only
If the price level falls by 5 percent and workers' money wage rates remain constant, firms'
quantity of labor demanded will decrease.
quantity of labor demanded will increase.
supply of jobs will increase.
None of these answers are correct.
quantity of labor demanded will decrease.
If the price level increases and workers' money wage rates remain constant, which of the following will occur?
I. | The quantity of labor supplied will decrease. |
II. | The real wage rate will decrease. |
III. | The labor supply curve will shift rightward. |
II and III
I and II
I only
I, II and III
I and II
If the labor market is in equilibrium and then the labor supply curve shifts rightward
there will be a surplus of jobs at the new equilibrium.
there will be a surplus of labor at the original equilibrium wage rate.
the equilibrium wage rate will rise.
there will be a shortage of labor at the original equilibrium wage rate.
there will be a surplus of labor at the original equilibrium wage rate.
Employment and (total) potential GDP increase if the
None of these answers are correct.
labor supply curve shifts rightward and the labor demand curve does not shift.
labor demand curve shifts leftward and the labor supply curve does not shift.
labor demand curve shifts leftward more than the labor supply curve shifts rightward.
labor supply curve shifts rightward and the labor demand curve does not shift.
If the population increases, then potential GDP ________ and employment ________.
decreases; decreases
decreases; increases
increases; decreases
increases; increases
increases; increases
Potential GDP per labor hour can increase due to
increases in labor productivity.
increases in population.
decreases in the quantity of capital.
increases in the quantity of money.
increases in labor productivity.
Technological change
increases potential GDP.
decreases labor productivity.
has no effect on employment.
lowers the real wage rate.
increases potential GDP.
Labor productivity is
real GDP per hour of labor.
real GDP per hour of labor times the number of people.
the rate of change in real GDP per hour of labor.
real GDP per hour of labor times the hours of work.
real GDP per hour of labor.
If both the supply of labor and the demand for labor increase, then
potential GDP increases.
potential GDP decreases.
full employment decreases.
the impact on potential GDP is uncertain.
potential GDP increases.
Human capital is the
technology used by humans to produce GDP.
plant and equipment produced by humans and not by machines.
machinery used by humans to produce GDP.
skill and knowledge accumulated by humans.
skill and knowledge accumulated by humans.
The nominal interest rate approximately equals which of the following?
the real interest rate minus the inflation rate
the real interest rate plus the inflation rate
the real interest rate minus the growth rate of real GDP
the real interest rate plus the growth rate of real GDP
the real interest rate plus the inflation rate
If you lend a dollar for a year and at the end of the year the price level has risen by 10 percent
the purchasing power of your loan has risen over the year regardless of the interest rate at which you lent it.
the purchasing power of your loan has remained constant over the year regardless of the interest rate at which you lent it.
you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan.
you must have earned a nominal interest rate of 5 percent to maintain the purchasing power of your loan.
you must have earned a nominal interest rate of 10 percent to maintain the purchasing power of your loan.
When the inflation rate is zero, the
real interest rate is greater than the nominal interest rate.
real interest rate is less than the nominal interest rate.
nominal interest rate is zero.
real interest rate equals the nominal interest rate.
real interest rate equals the nominal interest rate.
When the inflation rate is negative, the
real interest rate is greater than the nominal interest rate.
real interest rate is less than the nominal interest rate.
nominal interest rate is zero.
real interest rate equals the nominal interest rate.
real interest rate is greater than the nominal interest rate.
Suppose that you took out a $1,000 loan in January and had to pay $75 in annual interest. During the year, inflation was 6 percent. Which of the following statements is CORRECT?
The nominal interest rate is 7.5 percent and the real interest rate is 1.5 percent.
The nominal interest rate is 7.5 percent and the real interest rate is 13.5 percent.
The real interest rate is 7.5 percent and the nominal interest rate is 1.5 percent.
The real interest rate is 6 percent and the nominal interest rate is 7.5 percent.
The nominal interest rate is 7.5 percent and the real interest rate is 1.5 percent.
Assume you save $1,000 in a bank account that pays 8 percent interest per year and the inflation rate is 3 percent. At the end of the year you have earned
a nominal return of $50.
a negative real return.
a real return of $50.
a real return of $80.
a real return of $50
Other things remaining the same, the greater the expected profit
the less the amount of investment.
the greater the amount of investment.
the steeper is the investment demand curve.
the flatter is the investment demand curve.
the greater the amount of investment.
The demand for loanable funds curve shows that as the ________ interest rate increases, there will be ________ the curve.
nominal; a rightward shift in
real; a rightward shift in
nominal; movement down along
real; movement up along
real; movement up along
A movement downward along the demand for loanable funds curve occurs when
the expected profit from investment increases.
business expectations become more optimistic.
the real interest rate falls.
the supply of loanable funds decreases.
the real interest rate falls.
Greater optimism about the expected profits from investment projects
shifts the demand for loanable funds curve rightward.
shifts the demand for loanable funds curve leftward.
causes a movement upward along the demand for loanable funds curve.
causes a movement downward along the demand for loanable funds curve.
shifts the demand for loanable funds curve rightward.
Which of the following shifts the demand for loanable funds curve leftward?
a fall in the real interest rate
a rise in the real interest rate
a decrease in the taxes paid by the business
a decrease in the expected profit
a decrease in the expected profit
In the above figure, if the real interest rate is 6 percent, the quantity of loanable funds demanded is
$150 billion.
$300 billion.
$450 billion.
$600 billion.
$450 billion.
If households' disposable income decreases, then
households' saving will decrease.
households' saving will increase.
investment will increase.
Both households' saving will increase and investment will increase are correct.
households' saving will decrease.
In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF0. What happens if the real interest rate rises?
Nothing; the economy would remain at point a.
There would be a movement to a point such as b on supply of loanable funds curve SLF0.
The supply of loanable funds curve would shift rightward to a curve such as SLF2.
The supply of loanable funds curve would shift leftward to a curve such as SLF1.
There would be a movement to a point such as b on supply of loanable funds curve SLF0.
Technological progress that increases the expected profit shifts the demand for loanable funds curve
leftward and reduces the real interest rate.
rightward and increases the real interest rate.
rightward and reduces the real interest rate.
leftward and increases the real interest rate.
rightward and increases the real interest rate.
When a government has a budget surplus, the surplus
helps finance investment.
crowds-out private saving.
must be subtracted from private saving to get total saving.
increases the world real interest rate.
helps finance investment.
The idea that a government budget deficit decreases investment is called
government dissaving.
the crowding-out effect.
the Ricardo-Barro effect.
the capital investment effect.
the crowding-out effect.
If the government has a budget deficit, crowding out might occur. Crowding out is associated with all of the following EXCEPT
a higher real interest rate.
a decreased quantity of investment.
a smaller capital stock in the future.
decreased private saving.
decreased private saving.
If China's government runs a budget surplus and there is no Ricardo-Barro effect, there will be ________ in the supply of loanable funds, private saving ________ and investment ________.
an increase; decreases; increases
a decrease; increases; increases
an increase; increases; increases
a decrease; decrease; increases
an increase; decreases; increases
The Ricardo-Barro effect of a government budget deficit refers to
a change in private savings supply.
a large crowding out effect from a government budget deficit.
a large crowding out effect from a government budget surplus.
the international impact of government deficits.
a change in private savings supply.