Question 1

Which of the following best describes the unemployment rate?

Accepted Answer

The percentage of the labor force that is unemployed.

Question 2

Suppose the labor force in a country is 150 million, and 6 million people are unemployed. What is the unemployment rate?

$$	ext{Unemployment Rate} = \frac{	ext{Unemployed}}{	ext{Labor Force}} 	imes 100$$

Accepted Answer

$$6\%$$

Question 3

Which type of unemployment is most likely to increase during a recession?

Accepted Answer

Cyclical unemployment

Question 4

A worker who loses their job because their skills are no longer in demand due to technological change is experiencing:

Accepted Answer

Structural unemployment

Question 5

If the number of discouraged workers increases during a recession, what happens to the official unemployment rate?

Accepted Answer

It decreases because discouraged workers are not counted as unemployed.

Question 6

The labor force participation rate is calculated as:

$$	ext{Labor Force Participation Rate} = \frac{	ext{Labor Force}}{	ext{Working-age Population}} 	imes 100

If $$the labor force is 200 million and the working-age population is 250 million, what is the labor force participation rate?

Accepted Answer

$$80\%$$

Question 7

Which of the following government policies is most likely to increase the natural rate of unemployment?

Accepted Answer

Increasing the minimum wage above the market equilibrium

Question 8

A firm pays an efficiency wage. What is the likely effect on unemployment?

Accepted Answer

Unemployment increases because the wage is above the market equilibrium.

Question 9

The Consumer Price Index (CPI) is best described as:

Accepted Answer

A measure of the average prices paid by a typical urban family for goods and services.

Question 10

Suppose the CPI was 200 in 2020 and 210 in 2021. What was the inflation rate between 2020 and 2021?

$$	ext{Inflation Rate} = \frac{	ext{CPI}_{2021} - 	ext{CPI}_{2020}}{	ext{CPI}_{2020}} 	imes 100$$

Accepted Answer

$$5\%$$

Question 11

If a worker’s nominal wage stays the same but the CPI increases, what happens to the worker’s real wage?

Accepted Answer

It decreases.

Question 12

The real interest rate is calculated as:

$$	ext{Real Interest Rate} = 	ext{Nominal Interest Rate} - 	ext{Inflation Rate}

If $$the nominal interest rate is $$8\%$$ and the inflation rate is $$5\%$$, what is the real interest rate?

Accepted Answer

$$3\%$$

Question 13

Which of the following is a cost of unanticipated inflation?

Accepted Answer

It redistributes income between borrowers and lenders.

Question 14

If the CPI increases from 250 to 275 in one year, what is the inflation rate?

$$	ext{Inflation Rate} = \frac{275 - 250}{250} 	imes 100$$

Accepted Answer

$$10\%$$

Question 15

Which of the following best explains why the employment-population ratio may provide a better summary of the job market than the unemployment rate during a recession?

Accepted Answer

It includes discouraged workers who have stopped looking for work.

Question 16

If the nominal interest rate on a loan is $$12\%$$ and the inflation rate is $$15\%$$, what is the real interest rate?

$$	ext{Real Interest Rate} = 12\% - 15\%$$

Accepted Answer

$$-3\%$$

Question 17

Which of the following is NOT a bias that causes the CPI to overstate the true inflation rate?

Accepted Answer

Deflation bias

Question 18

A country experiences deflation. Which of the following is true?

Accepted Answer

The inflation rate is negative.

Question 19

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker loses their job because the factory relocates overseas.

Question 20

If the government increases the minimum wage above the equilibrium wage, what is the likely effect on unemployment?

Accepted Answer

Unemployment will increase, especially among low-skilled workers.

Unemployment and Inflation: Key Concepts and Measurement in Macroeconomics

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