Q: Suppose the working-age population of a country is 250 million, the labor force is 170 million, and the number of employed people is 160 million. What is the unemployment rate?

$$\frac{10\ \text{million}}{170\ \text{million}} \times 100 = 5.88\%$$

Q: If the CPI in 2010 was 220 and the CPI in 2020 was 275, what was the inflation rate over this period?

$$\frac{275 - 220}{220} \times 100 = 25\%$$

Q: If a country has a labor force of 100 million and a working-age population of 200 million, what is its labor force participation rate?

$$\frac{100\ \text{million}}{200\ \text{million}} \times 100 = 50\%$$

Q: If the cost to purchase a basket of goods in the base year is $$500 and the cost in the current year is 600$$, what is the CPI for the current year?

$$\frac{600}{500} \times 100 = 120$$

Q: If the CPI in 1997 was 160 and the CPI in 2022 was 293, what is the equivalent value in 2022 dollars of a $30,000 salary in 1997?

$$30,000 \times \frac{293}{160} = 54$$,937.50$

Question 1

Suppose the working-age population of a country is 250 million, the labor force is 170 million, and the number of employed people is 160 million. What is the unemployment rate?

Accepted Answer

$$\frac{10\ 	ext{million}}{170\ 	ext{million}} 	imes 100 = 5.88\%$$

Question 2

Which of the following best describes structural unemployment?

Accepted Answer

Unemployment that arises from a persistent mismatch between workers' skills and job requirements

Question 3

If the CPI in 2010 was 220 and the CPI in 2020 was 275, what was the inflation rate over this period?

Accepted Answer

$$\frac{275 - 220}{220} 	imes 100 = 25\%$$

Question 4

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

Accepted Answer

It fails to account for substitution bias when consumers switch to cheaper goods

Question 5

A worker loses their job because their skills are no longer needed due to technological change. What type of unemployment is this?

Accepted Answer

Structural unemployment

Question 6

If the nominal interest rate on a loan is 6% and the inflation rate is 2%, what is the real interest rate?

Accepted Answer

$$6\% - 2\% = 4\%$$

Question 7

Which of the following would cause the unemployment rate to be understated?

Accepted Answer

Excluding discouraged workers from the labor force

Question 8

During a recession, which type of unemployment increases the most?

Accepted Answer

Cyclical unemployment

Question 9

If a country has a labor force of 100 million and a working-age population of 200 million, what is its labor force participation rate?

Accepted Answer

$$\frac{100\ 	ext{million}}{200\ 	ext{million}} 	imes 100 = 50\%$$

Question 10

Which of the following is a cost of anticipated inflation?

Accepted Answer

Menu costs for firms

Question 11

A retiree living on a fixed income is most negatively affected by which economic phenomenon?

Accepted Answer

Unanticipated inflation

Question 12

If the cost to purchase a basket of goods in the base year is $$500 and the cost in the current year is 600$$, what is the CPI for the current year?

Accepted Answer

$$\frac{600}{500} 	imes 100 = 120$$

Question 13

Which survey is most likely to undercount self-employed workers in its employment statistics?

Accepted Answer

Establishment (payroll) survey

Question 14

If a worker is temporarily away from their job due to illness, how are they classified in government statistics?

Accepted Answer

Employed

Question 15

Why might the producer price index (PPI) provide an early warning of future consumer price inflation?

Accepted Answer

Producer prices reflect costs at earlier stages of production, which can be passed on to consumers

Question 16

A person who has not looked for work in the past month because they believe no jobs are available for them is classified as:

Accepted Answer

Discouraged worker (not in the labor force)

Question 17

If the CPI in 1997 was 160 and the CPI in 2022 was 293, what is the equivalent value in 2022 dollars of a $30,000 salary in 1997?

Accepted Answer

$$30,000 	imes \frac{293}{160} = 54$$,937.50$

Question 18

Which of the following is NOT a reason why the unemployment rate may overstate actual unemployment?

Accepted Answer

Distinguishing between unemployed and not in the labor force requires judgment

Question 19

Which government policy is most likely to increase the unemployment rate by raising the cost of labor above equilibrium?

Accepted Answer

Minimum wage laws

Question 20

If all prices and wages doubled overnight, what would be the immediate effect on the purchasing power of most people?

Accepted Answer

Purchasing power would remain unchanged

Unemployment and Inflation: Key Concepts in Macroeconomics

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