Question 1

Which of the following best describes the 'discouraged-worker effect' in the context of unemployment measurement?

Accepted Answer

It is the decline in the measured unemployment rate when people who want to work stop searching and are no longer counted as unemployed.

Question 2

Suppose the labor force in a country is 150 million, and 10 million people are unemployed. What is the unemployment rate? Use the formula $$ 	ext{unemployment rate} = \frac{	ext{unemployed}}{	ext{employed} + 	ext{unemployed}} .$$

Accepted Answer

15%

Question 3

Which of the following is NOT included in the calculation of the labor force participation rate?

Accepted Answer

People under 16 years old

Question 4

If the population aged 16 and over is 200 million and the labor force is 120 million, what is the labor force participation rate? Use the formula $$ 	ext{labor force participation rate} = \frac{	ext{labor force}}{	ext{population}} .$$

Accepted Answer

60%

Question 5

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

Accepted Answer

Cyclical unemployment

Question 6

A worker who loses their job due to technological changes in the industry and cannot find a similar job is experiencing:

Accepted Answer

Structural unemployment

Question 7

Which of the following best describes the Consumer Price Index (CPI)?

Accepted Answer

A price index computed each month using a bundle meant to represent the 'market basket' purchased by the typical urban consumer.

Question 8

If the nominal interest rate on a loan is 8% and the inflation rate is 3%, what is the real interest rate? Use the formula $$ 	ext{real interest rate} = 	ext{nominal interest rate} - 	ext{inflation rate} .$$

Accepted Answer

5%

Question 9

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

Accepted Answer

Debtors benefit at the expense of creditors.

Question 10

During a period of deflation, which group is most likely to benefit if the deflation is unanticipated?

Accepted Answer

Borrowers

Question 11

Which of the following is NOT a component of the natural rate of unemployment?

Accepted Answer

Cyclical unemployment

Question 12

Suppose the CPI increased from 200 to 210 over one year. What was the inflation rate for that year? Use the formula $$ 	ext{Inflation Rate} = \frac{	ext{CPI}_{	ext{new}} - 	ext{CPI}_{	ext{old}}}{	ext{CPI}_{	ext{old}}} 	imes 100 .$$

Accepted Answer

2.5%

Question 13

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate is searching for their first job.

Question 14

Which of the following best explains why inflation does not necessarily reduce everyone’s purchasing power?

Accepted Answer

Because input prices like wages also tend to rise during inflation.

Question 15

Which of the following is a plausible reason for the persistence of lower wages among workers who experienced unemployment during a recession?

Accepted Answer

They lose valuable work experience and skills, reducing their future earning potential.

Question 16

Which of the following is most likely to increase female labor force participation in developing economies?

Accepted Answer

Decline in fertility and improvement in health

Question 17

If the labor force is 100 million, the number of employed is 95 million, and the population aged 16 and over is 180 million, what is the unemployment rate and labor force participation rate? Use the formulas $$ 	ext{unemployment rate} = \frac{	ext{unemployed}}{	ext{labor force}} $$ and $$ 	ext{labor force participation rate} = \frac{	ext{labor force}}{	ext{population}} .$$

Accepted Answer

Unemployment rate: 5%, Labor force participation rate: 55.6%

Question 18

Which of the following is a cost of anticipated inflation?

Accepted Answer

Administrative costs associated with updating prices and contracts

Question 19

Which of the following best describes productivity growth?

Accepted Answer

The growth rate of output per worker

Question 20

If actual inflation is lower than anticipated inflation, who benefits?

Accepted Answer

Creditors

Unemployment, Inflation, and Long-Run Growth: Key Concepts in Macroeconomics

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