Q: Suppose the working-age population of a country is 200 million, the labor force is 130 million, and 120 million people are employed. What is the unemployment rate?

$$\frac{10}{130} \times 100 = 7.7\%$$

Q: The Consumer Price Index (CPI) is calculated using which formula?

$$\frac{\text{Cost of CPI basket at current prices}}{\text{Cost of CPI basket at base period prices}} \times 100$$

Q: If the CPI last year was 220 and this year it is 231, what is the CPI inflation rate?

$$\frac{231 - 220}{220} \times 100 = 5\%$$

Question 1

Which of the following best describes the labor force participation rate?

Accepted Answer

The percentage of the working-age population that is in the labor force.

Question 2

Suppose the working-age population of a country is 200 million, the labor force is 130 million, and 120 million people are employed. What is the unemployment rate?

Accepted Answer

$$\frac{10}{130} 	imes 100 = 7.7\%$$

Question 3

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker who lost their job because the factory moved overseas.

Question 4

If the unemployment rate is below the natural unemployment rate, which of the following is most likely true?

Accepted Answer

Real GDP is greater than potential GDP.

Question 5

Which of the following people would be classified as 'not in the labor force' according to the CPS definition?

Accepted Answer

A person who wants a job but has not searched for one in over 4 weeks.

Question 6

Unexpected inflation most likely benefits which of the following groups?

Accepted Answer

Borrowers who took out fixed-rate loans.

Question 7

The Consumer Price Index (CPI) is calculated using which formula?

Accepted Answer

$$\frac{	ext{Cost of CPI basket at current prices}}{	ext{Cost of CPI basket at base period prices}} 	imes 100$$

Question 8

Which of the following is a bias in the CPI that causes it to overstate inflation?

Accepted Answer

All of the above

Question 9

If the CPI last year was 220 and this year it is 231, what is the CPI inflation rate?

Accepted Answer

$$\frac{231 - 220}{220} 	imes 100 = 5\%$$

Question 10

Which of the following best describes core inflation?

Accepted Answer

Inflation measured using the PCE basket excluding food and fuel prices.

Question 11

A discouraged worker is best described as:

Accepted Answer

A person who wants a job but has stopped looking due to repeated failure.

Question 12

Which of the following is NOT a reason why the natural unemployment rate might increase?

Accepted Answer

The economy enters a recession.

Question 13

Suppose nominal wage rate is $20/hour and the CPI is 250. What is the real wage rate?

Accepted Answer

$$\frac{20}{250} 	imes 100 = 8$$

Question 14

Which of the following is an example of frictional unemployment?

Accepted Answer

A worker who leaves one job to search for another.

Question 15

Which of the following statements about hyperinflation is correct?

Accepted Answer

Hyperinflation is defined as inflation of 50 percent or more per month.

Question 16

If the employment-to-population ratio increases, which of the following is most likely true?

Accepted Answer

A larger percentage of the working-age population is employed.

Question 17

Which of the following is a direct effect of unexpected deflation?

Accepted Answer

Borrowers are made poorer.

Question 18

Which of the following is NOT included in the official definition of 'unemployed'?

Accepted Answer

A person who wants a job but has not searched for one in the last 6 weeks.

Question 19

Which of the following best explains why not all unemployment is considered 'bad' for the economy?

Accepted Answer

Some unemployment is due to normal labor turnover, which helps match workers to better jobs.

Chapter 5

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