Q: Given the following data: Employed = 15,000, Unemployed = 2,000, Working-age population = 25,000. What is the labour force participation rate?

$$\frac{15,000 + 2,000}{25,000} \times 100 = 68\%$$

Q: Which formula correctly calculates the unemployment rate?

$$\frac{\text{Unemployed}}{\text{Labour Force}} \times 100$$

Q: If the Consumer Price Index (CPI) for the current year is 120 and for the previous year is 115, what is the inflation rate?

$$\frac{120 - 115}{115} \times 100 = 4.35\%$$

Question 1

Which of the following best describes the unemployment rate?

Accepted Answer

The percentage of the labour force who are out of work and actively searching for jobs.

Question 2

Given the following data: Employed = 15,000, Unemployed = 2,000, Working-age population = 25,000. What is the labour force participation rate?

Accepted Answer

$$\frac{15,000 + 2,000}{25,000} 	imes 100 = 68\%$$

Question 3

Which type of unemployment is considered 'unhealthy' and typically requires government intervention?

Accepted Answer

Cyclical unemployment

Question 4

If the unemployment rate is above the natural rate, what does this indicate about the economy?

Accepted Answer

There is a recessionary gap.

Question 5

Which formula correctly calculates the unemployment rate?

Accepted Answer

$$\frac{	ext{Unemployed}}{	ext{Labour Force}} 	imes 100$$

Question 6

Which of the following is NOT included in the official unemployment rate?

Accepted Answer

Discouraged workers

Question 7

If the Consumer Price Index (CPI) for the current year is 120 and for the previous year is 115, what is the inflation rate?

Accepted Answer

$$\frac{120 - 115}{115} 	imes 100 = 4.35\%$$

Question 8

Which of the following best explains cost-push inflation?

Accepted Answer

Inflation caused by a decrease in the supply of goods and services, often due to rising input costs.

Question 9

According to the quantity theory of money, if the velocity of money and real output are constant, what happens if the quantity of money increases by 10%?

Accepted Answer

The inflation rate will increase by approximately 10%.

Question 10

Which scenario best illustrates frictional unemployment?

Accepted Answer

A recent college graduate is searching for their first job.

Question 11

If the real interest rate is 2% and the inflation rate is 3%, what is the nominal interest rate?

Accepted Answer

$$2\% + 3\% = 5\%$$

Question 12

Which of the following is a consequence of deflation?

Accepted Answer

Consumers postpone spending, leading to economic contraction.

Question 13

What does the Phillips Curve illustrate?

Accepted Answer

The trade-off between unemployment and inflation.

Question 14

Which of the following would NOT cause structural unemployment?

Accepted Answer

Seasonal changes in demand for labour.

Question 15

If the economy is experiencing stagflation, what is happening?

Accepted Answer

High inflation and high unemployment.

Question 16

Which of the following is true about the natural rate of unemployment?

Accepted Answer

It is the unemployment rate when the economy is at full employment.

Question 17

If the CPI overstates the cost of living, which of the following is a likely reason?

Accepted Answer

It does not account for quantity switches to cheaper substitutes.

Question 18

Which of the following best describes demand-pull inflation?

Accepted Answer

Inflation caused by increased aggregate demand during economic expansion.

Question 19

If the velocity of money ($$V) is 5$$, the quantity of money ($$M) is$$ $$200$$ billion, and the aggregate quantity of real output ($$Q) is$$ $$400$$ billion, what is the average price level ($$P) $$according to the quantity theory of money?

Accepted Answer

$$P = \frac{M 	imes V}{Q} = \frac{200 	imes 5}{400} = 2.5$$

Question 20

Which of the following is most likely to benefit from unexpected inflation?

Accepted Answer

Borrowers with fixed-rate loans

ch 8 Unemployment and Inflation: Key Concepts in Macroeconomics

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