$$ \frac{8}{160} \times 100 = 5\% $$

$$ \frac{1,200}{1,000} \times 100 = 120 $$

Question 1

Which of the following best describes the official definition of 'unemployed' in the United States?

Accepted Answer

An adult (aged 16 or older) who is willing and able to work, actively looking for work, but has not found a job.

Question 2

Suppose the labor force in a country is 160 million people, and 8 million are officially unemployed. What is the unemployment rate?

Accepted Answer

$$ \frac{8}{160} 	imes 100 = 5\% $$

Question 3

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker loses their job because their skills are no longer needed due to automation.

Question 4

If the cost of a market basket in the base year is $$1,000 and in the current year is 1$$,200, what is the price index for the current year?

Accepted Answer

$$ \frac{1,200}{1,000} 	imes 100 = 120 $$

Question 5

Which of the following best describes frictional unemployment?

Accepted Answer

Unemployment caused by workers searching for new jobs or transitioning between jobs.

Question 6

A country experiences an inflation rate of 4% while the nominal wage increases by 3%. What happens to the real wage?

Accepted Answer

The real wage decreases by 1%.

Question 7

Which of the following is NOT included in the calculation of the natural rate of unemployment?

Accepted Answer

Cyclical unemployment

Question 8

If the nominal interest rate is 7% and the expected inflation rate is 2%, what is the real interest rate?

Accepted Answer

$$ 7\% - 2\% = 5\% $$

Question 9

Which of the following best describes the GDP deflator?

Accepted Answer

A price index measuring the changes in prices of all new goods and services produced in the economy.

Question 10

Who is most likely to lose from unanticipated inflation?

Accepted Answer

Creditors (lenders)

Question 11

Which of the following is a leading indicator of a potential economic downturn?

Accepted Answer

A rise in unemployment insurance claims

Question 12

A business cycle contraction is best described as:

Accepted Answer

A period during which the pace of national economic activity is slowing down.

Question 13

If a worker quits their job voluntarily to look for a better opportunity, they are classified as a:

Accepted Answer

Job leaver

Question 14

Which of the following best explains why the official unemployment rate may underestimate true unemployment?

Accepted Answer

Discouraged workers are not counted as unemployed.

Question 15

Which price index is primarily used by the Federal Reserve as its main inflation indicator?

Accepted Answer

Personal Consumption Expenditure (PCE) Index

Question 16

Suppose the cost of a market basket in 2010 (base year) is $$1,500 and in 2020 is 1$$,800. Calculate the price index for 2020.

Accepted Answer

$$ \frac{1,800}{1,500} 	imes 100 = 120 $$

Question 17

Which of the following is an example of a menu cost?

Accepted Answer

The expense a restaurant incurs when it must print new menus due to rising prices.

Question 18

If the labor force participation rate increases, which of the following must be true?

Accepted Answer

A higher percentage of the working-age population is either employed or actively seeking employment.

Question 19

Which of the following best describes cyclical unemployment?

Accepted Answer

Unemployment resulting from business recessions that occur when aggregate demand is insufficient.

Question 20

A country experiences deflation. Which of the following is most likely to occur?

Accepted Answer

The average of all prices of goods and services in the economy decreases.

Macroeconomics Study Notes: Unemployment, Inflation, and Deflation

Study Guide - Practice Questions