Question 1

Which of the following best describes the labor force participation rate?

Accepted Answer

The percentage of the working-age population that is in the labor force.

Question 2

Suppose the labor force in a country is 160 million people, and 8 million are unemployed. What is the unemployment rate? Use the formula $$	ext{Unemployment Rate} = \frac{	ext{Number of Unemployed}}{	ext{Labor Force}} 	imes 100.$$

Accepted Answer

$$8\%$$

Question 3

Which of the following is an example of structural unemployment?

Accepted Answer

A hand-drawn animator who cannot find work because the industry now uses computer animation.

Question 4

During the Covid-19 pandemic, why did the official unemployment rate initially understate the true level of unemployment?

Accepted Answer

The BLS counted workers who were not working but still being paid as employed.

Question 5

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

Accepted Answer

Unemployment insurance with generous benefits

Question 6

If the Consumer Price Index (CPI) was 120 in 2020 and 126 in 2021, what was the inflation rate between these years? Use the formula $$	ext{Inflation Rate} = \frac{	ext{CPI}_{2021} - 	ext{CPI}_{2020}}{	ext{CPI}_{2020}} 	imes 100.$$

Accepted Answer

$$5\%$$

Question 7

Which of the following is a problem with using the CPI as a measure of inflation?

Accepted Answer

It does not account for changes in the quality of goods.

Question 8

A worker is not currently at work, is available for work, and has actively looked for a job in the past month. According to government statistics, this person is:

Accepted Answer

Unemployed

Question 9

If the nominal interest rate on a loan is $$6\%$$ and the inflation rate is $$2\%$$, what is the real interest rate? Use the formula $$	ext{Real Interest Rate} = 	ext{Nominal Interest Rate} - 	ext{Inflation Rate}.$$

Accepted Answer

$$4\%$$

Question 10

Which of the following best explains why deflation can be dangerous for an economy?

Accepted Answer

It can lead to postponed purchases, reduced production, and higher unemployment.

Question 11

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate searching for their first job.

Question 12

If a worker is available for work but has not looked for a job in the past four weeks because they believe no jobs are available, they are classified as:

Accepted Answer

Discouraged worker

Question 13

Which of the following is a likely effect of an increase in the minimum wage, according to studies cited in the text?

Accepted Answer

A 10 percent increase in the minimum wage reduces teenage employment by about 2 percent.

Question 14

Which of the following is NOT a cost of anticipated inflation?

Accepted Answer

Elimination of all unemployment

Question 15

Why might the Producer Price Index (PPI) give early warning of future movements in consumer prices?

Accepted Answer

It tracks prices of inputs and intermediate goods used by producers, which can affect consumer prices later.

Question 16

Suppose your mother earned $$25,000 in 1995. If the CPI was 152.4 in 1995 and 259.1 in 2020, what is her 1995 salary equivalent in 2020 dollars? Use the formula $$	ext{Salary in 2020 dollars} = 	ext{Salary in 1995} 	imes \frac{	ext{CPI}_{2020}}{	ext{CPI}_{1995}}$.

Accepted Answer

$$42,499$$

Question 17

Which of the following best describes the natural rate of unemployment?

Accepted Answer

The unemployment rate when cyclical unemployment is zero.

Question 18

Which of the following is a reason why the establishment survey might underestimate employment during a recession?

Accepted Answer

It does not include self-employed workers.

Question 19

What is an efficiency wage?

Accepted Answer

A wage set above the market equilibrium to increase worker productivity.

Question 20

Which of the following is a plausible consequence of unanticipated inflation?

Accepted Answer

It makes borrowing and lending riskier due to unpredictable real interest rates.

Unemployment and Inflation: Key Concepts and Measurement in Macroeconomics

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