Econ 2105 Final Exam

The unemployment rate measures:

unemployed workers as a percentage of the labor force.

During the Great Depression of the 1930s, the unemployment rate reached more than _________ of the labor force.

25%

Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:

out of the labor force

The U.S. unemployment rate moves up and down as the economy moves in and out of recessions. But over time, the unemployment rate seems to return to a range of ____________.

4%-6%

If the unemployment rate is 8 percent, then this means:

8 percent of the labor force is unemployed

If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals:

25%

During the deep recessions of the early 1980s and of 2007-2009, unemployment reached roughly __________.

10%

A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:

frictionally unemployed

frictional unemployment is?

unemployment that is due to normal turnover in the labor market.

If a nation's labor force receives a significant influx of young workers:

the natural rate of unemployment is likely to increase.

The type of unemployment that occurs because of a recession is called

cyclical unemployment

The definition of market equilibrium states that at the _______________, the quantity of labor demanded by employers will equal the quantity supplied.

equilibrium wage

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the ______________.

business cycle

The most significant real economic cost of high unemployment is:

the potential goods and services that might have been produced but weren't.

Women composed __________ of the paid workforce in 1900 and 50% of the paid workforce in 2010.

18%

Karen chooses to go to university fulltime rather than to work. Karen:

is not part of the labor force

In November 2010 the labor force in Siouxtown, was 14,800. There were 14,483 persons employed. The local unemployment rate:

was 2.1%

The unemployment rate in a town in which 65,400 persons are employed and 11,000 are unemployed equals:

14.4%

______________________ argues that the productivity of workers will increase if they are paid more, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate.

efficiency wage theory

Freelife, New Hampshire has a labor force of 78,567 persons and employment of 74,382. The unemployment rate for the city is:

5.3%

If the unemployment rate is 6 percent and the number of persons unemployed is 6 million, then the number of people employed is equal to

94 million

Gomer loses his job as a road construction worker and cannot find another position with equivalent pay and benefits. As a result, he is still checking the want ads and reporting to the unemployment office on a weekly basis. He is considered to be:

unemployed

true or false: Employment insurance compensation increases the opportunity cost of being unemployed

false

Through good economic years and bad, many European economies had unemployment rates hovering near _________ since the 1970s

10%

Craigburg has a working age population of 20 million. Of those, 11 million are employed and 1 million are unemployed. The unemployment rate is ________ and the participation rate is __________.

8.3%; 60%

Cyclical unemployment arises when

business activity in the macroeconomy declines

Frictional unemployment occurs when:

a worker decides to quit one job to seek a different job

A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as

cyclically unemployed

The _________________ argument points out that if an employer reacts to poor business conditions by reducing pay for all workers, then the best workers, with the best employment alternatives at other firms, are the most likely to leave and the least-attractive workers, with fewer employment alternatives, are more likely to stay.

adverse selection of wage cuts

The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce:

frictional unemployment

Each month the Census Bureau carries out the Current Population Survey (CPS) (which has been carried out every month since 1940). A total of __________ households are contacted every month.

60,000

The unemployment rate may overestimate the true extent of unemployment if:

many people who claim to be unemployed actually work in the underground economy. and people falsely claim that they are actively seeking work in order to receive unemployment benefits.

Insofar as government public policy is concerned, the best way to battle unemployment would be __________________.

to minimize recessions

The labor force consists of

all adults who are working or actively seeking work.

The unemployment rate may underestimate the true extent of unemployment if:

many part-time employees would like to work fulltime, but are unable to get the additional work.

A university student who is enrolled in school fulltime and not seeking employment is considered:

out of the labor force

Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate?

it would fall

The extent of _______________________ will depend on how easy it is for workers to learn about alternative jobs, which may reflect the ease of communications about job prospects in the economy.

frictional umployment

__________ implies that pressure for price increases reaches across _______________markets, not just one.

inflation; most

While one occasionally sees references to inflation over short time periods, the term typically implies a(n)_____________ in prices.

ongoing rise

The effects of inflation are seen in

goods, services, wages and income levels

Inflation implies that the level of all prices _____________________.

increase

When Anders took out his first two-year membership with Maxima Gym in 2004, the fee was $540.00.  He renewed his membership three times; in 2006 for $580.00, in 2008, for $600.00, and again in 2010, for $630.00. What is the overall rate of inflation for Anders' gym membership?

16.66%

Inflation can be calculated in terms of how the overall cost of ___________________ changes over time.

the basket of goods

If the price index moves from 107 to 110, the rate of inflation is:

2.8%

The most commonly cited measure of inflation in the United States is:

the consumer price index (CPI)

One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living, is:

substitution bias

The percentage change in the price level from one time period to the next, whether the price level is measured in terms of money or as a price index, will be the _____________.

inflation rate

The basket of goods in the Consumer Price Index consists of about _________ products; that is, several hundred specific products in over __________ broad-item categories.

80,000; 200

Two factors that complicate the calculation of the inflation rate are:

substitution and quality/new product bias

When we want to measure wage inflation in the labor market, we use the:

employment cost index

The Producer Price Index is based on prices paid for supplies and inputs by:

producers of goods and services

The ____________________ is based on the prices of merchandise that are exported or imported.

international product index

Another term used to describe negative inflation is:

deflation

In the early 1990's extremely high inflation rates of 2500% were common in Russia. During that time, we can say that as a result of those inflation rates, Russia was experiencing ___________________.

hyperinflation

Which of the following is an example of one of the major categories in the overall CPI?

recreation

The situation where the buying power of money in terms of goods and services increases is called:

deflation

Which of the following is the name used to describe the price index that consists of intermediate goods and finished goods?

producer price index

What name is given to the index based on the prices of exported or imported merchandise?

international price index

An economics professor is discussing a measure of inflation over time based on a basket of goods comprised of all the components of GDP. Which measure is it?

GDP deflator

The GDP deflator is a price index that includes the following components of GDP:

Consumption, Investment, Government plus Exports minus Imports

With regard to the economy, the term negative inflation is synonymous with which of the following?

deflation

An analyst needs to adjust the nominal GDP for the years 2000 and 2010 into real terms to conclude his comparison analysis. The nominal GDP in 2000 was $672 billion and $1,690 billion for 2010; the real interest rate was 6.79% in 2000 and 3.71% in 2010; the 2000 deflator was 24 and 51 in 2010. What is the real gain?

18.34%

Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 74, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?

$2,449 billion

What distinguishes the real value of a statistic from the nominal value of a statistic?

adjusting for inflation

Nancy's union has negotiated a three-year wage contract that provides for a 2.4% increase indexed to inflation. The rates of inflation are forecast to be 1.62%, 1.93% and 2.21% respectively. How will Nancy's wage increase be expressed in the new contract?

COLA plus 2.4%

When a price, wage, or interest rate is adjusted automatically with inflation, it is said to be __________.

indexed

In the 1970s and 1980s, labor unions commonly negotiated wage contracts that had _______________________ which guaranteed that their wages would keep up with inflation.

cost of living adjustments

The effect of substitution bias is that the rise in the price of a fixed basket of goods over time tends to ___________________ the rise in a consumer's true cost of living, because it doesn't take into account that the person can substitute between goods according to changes in their relative prices.

overstate

The __________________ is the nominal interest rate minus the rate of inflation.

real interest rate

A payment is said to be ________________ if it is automatically adjusted for inflation.

indexed

A lender demands an interest rate in part to compensate for any expected ___________, so that the money that is repaid in the future will have at least as much buying power as the money that was originally loaned.

inflation

Suppose that the table below shows the spending of typical consumers in the survey for a price index.

Year	Hamburger		Aspirin		Movies
	Price	Quantity	Price	Quantity	Price	Quantity
2020	$3.00	20	$10.00	1	$6.00	5
2021	$3.20	21	$10.00	2	$6.50	4

If the Bureau of Labor Statistics chooses 2020 as a base year, what is the price index in 2020 and in 2021?

2020: 100, 2021: 116.5

The following table shows the revenues of movies that are measured in the year of release. 

Release Year	Movie	Revenue	CPI
1965	Sound of Music	$163.20	13.3
1977	Star Wars	$460.90	25.6
2021	Spider Man- No way home	$811.30	114.3

When inflation is considered, which of the following movies made the biggest revenue? 

Star Wars

The following table shows the revenues of movies that are measured in the year of release. 

Release Year	Movie	Revenue	CPI
1965	Sound of Music	$163.20	50.1
1977	Star Wars	$460.90	75.1
2021	Spider Man- No way home	$811.30	100

When inflation is considered, which of the following movies made the biggest revenue? 

Spider man- no way home

Alex wants to measure the nominal 1998 GDP of $993 billion in 2008 dollars. From the data he gathered, he knows the deflator for 1998 is 30 and for 2008, it is 62.3, and that real interest in those years was 6.23% and 3.21% respectively. If he avoids making a misleading calculation, what will the value be?

$2,062 billion

If the CPI increased from 160 to 168 over one year's time, what would be the rate of inflation for that year?

5.0%

Goods and services produced in one country that are then sold in other countries are called ____________.

exports

The term __________ is used to describe what those in one country buy from those in other countries.

imports

The term _____________ describes circumstances where a country's exports exceed its imports.

trade surplus

The term _____________ describes circumstances where a country's imports exceed its exports.

trade deficit

The term "merchandise trade balance" is used to describe:

the balance of trade in goods

A country's current account balance refers to a broad measure of the balance of trade that includes:

goods and services, international flows of income, and foreign aid.

With respect to the national saving and investment identity for any country, the quantity of _______________ at any given time by savings must ________________ for purposes of making investments.

financial capital supplied; equal the quantity of capital financial demanded

The ________________ refers to the gap that can exist between what a nation's _____________, and a nation's ____________________.

balance of trade; producers sell abroad; imports

If exports ______________, then the economy is said to have a trade surplus.

exceed imports

If imports ______________, then the economy is said to have a trade deficit.

exceed exports

If exports and imports:

are equal, then trade is balanced.

From a macroeconomic perspective, if GDP economic indicators show a decline of 10% or more in a single year, then which of the following outcomes is most likely to result?

deep economic recession

Trade surpluses and trade deficits can be __________________ for an economy in certain circumstances.

either beneficial or harmful

An economy with a larger involvement in foreign trade:

may measure its exports as a share of GDP.

The extent to which a national economy is involved in global trade:

is not very strongly related to the issue of whether the economy has a substantial trade imbalance. and is not very strongly related to the underlying economic meaning of trade imbalances.

What is the most common method of measuring flows of trade?

comparing exports of goods, services, and financial capital between countries

In most high-income economies, including the United States, goods currently make up ___________, while services currently compose ____________.

less than half of total production; more than half of total production

The surge in international trade related to services to be performed in one country and sold in another that began in the 1990s has been powered by which of the following?

technological advances

At the outset of the 21st century, most global trade took the form of:

goods, rather than services

Economists typically rely on a broader measure of international trade known as the ___________________, which includes _____________________________.

current account balance; goods, services, international income flows, and foreign aid.

In the United States, which of the following government institutions would most likely provide economists with the basic data for merchandise trade?

census bureau

In the U.S., all companies involved in international flows of capital must file reports, which are ultimately compiled by the:

department of the treasury

One of the following must be used as a starting point in order to perform an analysis that will determine what the connections between imbalances of trade in goods and services and the flows of international financial capital are. Which one is it?

define the balance of trade