$$\frac{70 - 50}{50} \times 100 = 40\%$$

Question 1

Which of the following best describes structural unemployment?

Accepted Answer

Unemployment caused by changes in technology or foreign competition that alter the skills needed for jobs.

Question 2

Suppose the CPI basket in the base year costs $$50 and in the current year costs 70. $$What is the inflation rate?

Accepted Answer

$$\frac{70 - 50}{50} 	imes 100 = 40\%$$

Question 3

Which of the following is NOT a reason why inflation is considered harmful?

Accepted Answer

It encourages consumers to delay purchases, reducing spending.

Question 4

If the nominal interest rate is 7% and the inflation rate is 3%, what is the real interest rate?

Accepted Answer

$$7\% - 3\% = 4\%$$

Question 5

Which of the following is a direct consequence of deflation?

Accepted Answer

Consumers delay purchases, reducing incomes and spending further.

Question 6

Which group is included in the U.S. labor force?

Accepted Answer

People who are employed or actively seeking employment.

Question 7

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

Accepted Answer

It keeps the basket of goods fixed, ignoring consumer substitution.

Question 8

What does the Phillips curve illustrate?

Accepted Answer

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 spends two months searching for their first job.

Question 10

If the CPI in 1982-84 is set to 100 and the CPI in August 2023 is 306, what does this indicate?

Accepted Answer

Prices have more than tripled since the base period.

Question 11

Which of the following best describes cyclical unemployment?

Accepted Answer

Unemployment that rises during recessions and falls during expansions.

Question 12

Which of the following is NOT included in the working-age population?

Accepted Answer

People in prison or nursing homes.

Question 13

If the government overstates inflation due to CPI bias, what is a likely consequence?

Accepted Answer

Social security payments increase faster than necessary to maintain purchasing power.

Question 14

Which of the following is true about the natural rate of unemployment (NAIRU)?

Accepted Answer

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

Question 15

Which of the following would NOT be counted as unemployed according to the BLS definition?

Accepted Answer

A person who has not looked for work in the past four weeks.

Question 16

Which component has the largest weight in the CPI basket?

Accepted Answer

Housing

Question 17

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

Accepted Answer

People lose their life savings as prices explode.

Question 18

Which of the following best explains why some unemployment is considered inevitable in a healthy economy?

Accepted Answer

Creative destruction and labor market turnover require some reallocation of workers.

Question 19

If actual GDP is below potential GDP, what type of unemployment is likely to increase?

Accepted Answer

Cyclical unemployment

Question 20

Which of the following statements about the Phillips curve is most accurate based on recent data?

Accepted Answer

The Phillips curve was clear in 1950-70, but recent data is more complicated due to factors like oil shocks and policy changes.

Unemployment and Inflation: Key Macroeconomic Concepts and the Phillips Curve

Study Guide - Practice Questions