Q: Suppose the cost of a CPI basket in the base year is $$100, and in the current year it is 140. $$What is the Consumer Price Index (CPI) for the current year?

$$\displaystyle \frac{140}{100} \times 100 = 140$$

Q: The formula for the unemployment rate is:

$$\displaystyle \frac{\text{Unemployed workers}}{\text{Labor force}} \times 100$$

Q: If the labor force is 200 million and the number of unemployed workers is 10 million, what is the unemployment rate?

$$\displaystyle \frac{10}{200} \times 100 = 5\%$$

Question 1

Which of the following best describes structural unemployment?

Accepted Answer

Unemployment that occurs when workers lose jobs due to changes in technology or foreign competition that alter the skills needed for jobs.

Question 2

Suppose the cost of a CPI basket in the base year is $$100, and in the current year it is 140. $$What is the Consumer Price Index (CPI) for the current year?

Accepted Answer

$$\displaystyle \frac{140}{100} 	imes 100 = 140$$

Question 3

Which of the following is NOT included in the labor force?

Accepted Answer

A person who is not working and has not looked for a job in the past four weeks.

Question 4

If the unemployment rate increases during a recession, which type of unemployment is most likely to rise?

Accepted Answer

Cyclical unemployment

Question 5

The formula for the unemployment rate is:

Accepted Answer

$$\displaystyle \frac{	ext{Unemployed workers}}{	ext{Labor force}} 	imes 100$$

Question 6

Which of the following is a potential bias in the Consumer Price Index (CPI)?

Accepted Answer

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

Question 7

If the nominal interest rate is 8% and the inflation rate is 3%, what is the real interest rate?

Accepted Answer

$$\displaystyle 8\% - 3\% = 5\%$$

Question 8

Which of the following statements about the Phillips Curve is correct?

Accepted Answer

It shows an inverse relationship between unemployment and inflation.

Question 9

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate is searching for their first job.

Question 10

If the labor force is 200 million and the number of unemployed workers is 10 million, what is the unemployment rate?

Accepted Answer

$$\displaystyle \frac{10}{200} 	imes 100 = 5\%$$

Question 11

Which of the following would cause the CPI to overstate the true inflation rate?

Accepted Answer

Consumers substitute cheaper goods for more expensive ones, but the CPI basket does not reflect this change.

Question 12

During a period of hyperinflation, which of the following is most likely to occur?

Accepted Answer

Commerce is disrupted as people stop accepting the currency.

Question 13

Which of the following best explains why the unemployment rate tends to rise during recessions?

Accepted Answer

Cyclical unemployment increases because GDP is below its potential.

Question 14

If the working-age population is 250 million, the labor force is 150 million, and 10 million are unemployed, what is the labor force participation rate?

Accepted Answer

$$\displaystyle \frac{150}{250} 	imes 100 = 60\%$$

Question 15

Which of the following is a consequence of deflation?

Accepted Answer

Consumers delay purchases, reducing demand and potentially leading to a recession.

Question 16

A person who has been laid off and is waiting to be recalled to work is:

Accepted Answer

Counted as unemployed.

Question 17

Which of the following would NOT be considered when calculating the CPI?

Accepted Answer

Changes in the quality of goods over time.

Question 18

If the CPI increases from 120 to 132 over one year, what is the annual inflation rate?

Accepted Answer

$$\displaystyle \frac{132 - 120}{120} 	imes 100 = 10\%$$

Question 19

Which of the following best describes the relationship between nominal and real interest rates?

Accepted Answer

$$\displaystyle 	ext{Real interest rate} = 	ext{Nominal interest rate} - 	ext{Rate of inflation}$$

Unemployment, Inflation, and Related Macroeconomic Concepts

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