Q: Suppose the adult population of a country is 250 million, with 150 million employed and 10 million unemployed. What is the labor force participation rate?

$$100 \times \frac{160}{250} = 64\%$$

Question 1

Suppose the adult population of a country is 250 million, with 150 million employed and 10 million unemployed. What is the labor force participation rate?

Accepted Answer

$$100 	imes \frac{160}{250} = 64\%$$

Question 2

Which of the following best describes 'frictional unemployment'?

Accepted Answer

Unemployment that results from workers spending time searching for jobs that best suit their skills and tastes.

Question 3

A discouraged worker is someone who:

Accepted Answer

Would like to work but has given up looking for jobs and is classified as not in the labor force.

Question 4

If the reserve ratio $$R is 20$$%, what is the money multiplier?

Accepted Answer

$$\frac{1}{0.2} = 5$$

Question 5

Which of the following is NOT a function of money?

Accepted Answer

A means of production

Question 6

Suppose the price level $$P$$ increases from 2 to 4. What happens to the value of money?

Accepted Answer

It decreases from $$\frac{1}{2} to$$ $$\frac{1}{4}$$

Question 7

Which of the following best explains why the unemployment rate is not a perfect indicator of joblessness?

Accepted Answer

It excludes discouraged workers and does not distinguish between full-time and part-time work.

Question 8

If the Federal Reserve wants to increase the money supply, which of the following actions should it take?

Accepted Answer

Buy government bonds in open-market operations.

Question 9

According to the quantity theory of money, if the velocity of money ($$V) $$and real output ($$Y) $$are constant, what happens if the money supply ($$M) $$doubles?

Accepted Answer

The price level ($$P) $$doubles.

Question 10

Which of the following is an example of 'menu costs' caused by inflation?

Accepted Answer

A restaurant printing new menus to update prices.

Question 11

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

Accepted Answer

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

Question 12

Which of the following best describes the Fisher Effect?

Accepted Answer

The nominal interest rate adjusts one-for-one with changes in the inflation rate.

Question 13

Suppose a country experiences hyperinflation. Which of the following is most likely to be the cause?

Accepted Answer

The government prints excessive amounts of money to finance its spending.

Question 14

Which of the following is a cost of unexpected inflation?

Accepted Answer

Arbitrary redistributions of wealth between creditors and debtors.

Question 15

If banks decide to hold more reserves than required, what is the likely effect on the money supply?

Accepted Answer

The money supply will decrease because banks make fewer loans.

Question 16

Which of the following is an example of commodity money?

Accepted Answer

Gold coins

Question 17

Suppose the Fed lowers the reserve requirement from 20% to 10%. What is the effect on the money multiplier?

Accepted Answer

It increases from $$\frac{1}{0.2} = 5 to$$ $$\frac{1}{0.1} = 10$$

Question 18

Which of the following policies would most likely increase frictional unemployment?

Accepted Answer

Increasing the generosity of unemployment insurance benefits.

Question 19

If the government imposes a minimum wage above the equilibrium wage, what type of unemployment is most likely to increase?

Accepted Answer

Structural unemployment

Question 20

Which of the following best describes the 'inflation tax'?

Accepted Answer

The reduction in the value of money held by the public when the government prints money to finance spending.

Question 21

A bank has $1,000 in deposits and a reserve ratio of 10%. How much can it lend out?

Accepted Answer

$$1,000 - (0.10 	imes 1,000) = 900$

Unemployment, Money, and Inflation: Key Concepts in Macroeconomics

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