Question 1

Which of the following best describes the 'discouraged-worker effect' in the context of unemployment statistics?

Accepted Answer

It is the decline in the measured unemployment rate when people who want to work stop searching due to lack of available jobs.

Question 2

Suppose the labor force in a country is 200 million people, and 10 million are unemployed. What is the unemployment rate?

$$	ext{Unemployment Rate} = \frac{	ext{Number of Unemployed}}{	ext{Labor Force}} 	imes 100$$

Accepted Answer

$$5\%$$

Question 3

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker who loses their job because the factory relocates overseas.

Question 4

If the Consumer Price Index (CPI) increases from 200 to 210 over one year, what is the annual inflation rate?

$$	ext{Inflation Rate} = \frac{	ext{CPI}_{	ext{new}} - 	ext{CPI}_{	ext{old}}}{	ext{CPI}_{	ext{old}}} 	imes 100$$

Accepted Answer

$$10\%$$

Question 5

Which of the following best describes the 'natural rate of unemployment'?

Accepted Answer

The sum of frictional and structural unemployment rates.

Question 6

A country has a population of 300 million people, of which 180 million are in the labor force. What is the labor force participation rate?

$$	ext{Labor Force Participation Rate} = \frac{	ext{Labor Force}}{	ext{Population 16+}} 	imes 100$$

Accepted Answer

$$60\%$$

Question 7

Which of the following is a likely consequence of unanticipated inflation?

Accepted Answer

Debtors benefit at the expense of creditors.

Question 8

If the nominal interest rate on a loan is $$8\%$$ and the inflation rate is $$3\%$$, what is the real interest rate?

$$	ext{Real Interest Rate} = 	ext{Nominal Interest Rate} - 	ext{Inflation Rate}$$

Accepted Answer

$$5\%$$

Question 9

Which of the following best describes frictional unemployment?

Accepted Answer

Unemployment due to the normal turnover in the labor market.

Question 10

If the CPI is used to adjust Social Security benefits and the chain-linked CPI is adopted instead, what is the most likely effect?

Accepted Answer

Benefits would increase more slowly.

Question 11

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

Accepted Answer

A person who is not looking for work and does not want a job.

Question 12

Which of the following best explains why the costs of unemployment are not evenly distributed across the population?

Accepted Answer

Some groups, such as the young and less educated, are more likely to be unemployed.

Question 13

Suppose the output of an economy grows by $$4\%$$ and the population grows by $$2\%. $$What is the per-capita output growth rate?

$$	ext{Per-Capita Output Growth} = 	ext{Output Growth} - 	ext{Population Growth}$$

Accepted Answer

$$2\%$$

Question 14

Which of the following is a direct cost of anticipated inflation?

Accepted Answer

Administrative costs associated with updating prices and contracts.

Question 15

During a recession, which type of unemployment typically increases the most?

Accepted Answer

Cyclical unemployment

Question 16

If falling prices (deflation) are unanticipated, which group is most likely to benefit?

Accepted Answer

People on fixed pensions

Question 17

Which of the following best describes productivity growth?

Accepted Answer

The growth rate of output per worker.

Question 18

A household hires someone to clean their house and uses the extra time for leisure. How does this affect GDP?

Accepted Answer

GDP increases because the wages paid to the household worker are counted.

Question 19

Which of the following is a likely long-term effect of high unemployment among recent college graduates during a recession?

Accepted Answer

Their wage rates may lag behind those who were not unemployed for many years.

Unemployment, Inflation, and Long-Run Growth: Study Notes for Macroeconomics

Study Guide - Practice Questions