Q: Suppose Statistics Canada reports that there are 20 million people in the labour force, of which 1.5 million are unemployed. What is the unemployment rate?

$$\frac{1.5\text{ million}}{20\text{ million}} \times 100 = 7.5\%$$

Q: If the CPI in 2000 is 100 and the CPI in 2020 is 150, what is the percentage increase in the price level over this period?

$$\frac{150 - 100}{100} \times 100 = 50\%$$

Q: If the labour force participation rate is 65% and the working-age population is 30 million, how many people are in the labour force?

$$0.65 \times 30,000,000 = 19,500,000$$

Q: If a country’s CPI increases from 120 to 122 in one year, what is the annual inflation rate?

$$\frac{122 - 120}{120} \times 100 = 1.67\%$$

Question 1

Suppose Statistics Canada reports that there are 20 million people in the labour force, of which 1.5 million are unemployed. What is the unemployment rate?

Accepted Answer

$$\frac{1.5	ext{ million}}{20	ext{ million}} 	imes 100 = 7.5\%$$

Question 2

Which of the following best describes structural unemployment?

Accepted Answer

Unemployment caused by a mismatch between workers' skills and the requirements of available jobs.

Question 3

If the CPI in 2000 is 100 and the CPI in 2020 is 150, what is the percentage increase in the price level over this period?

Accepted Answer

$$\frac{150 - 100}{100} 	imes 100 = 50\%$$

Question 4

A worker loses their job at a ski resort at the end of winter and is unemployed until the next season. What type of unemployment is this?

Accepted Answer

Seasonal unemployment

Question 5

Which government policy is most likely to reduce structural unemployment?

Accepted Answer

Funding retraining programs for laid-off workers

Question 6

If the nominal interest rate is 5% and the inflation rate is 2%, what is the real interest rate?

Accepted Answer

$$5\% - 2\% = 3\%$$

Question 7

Which of the following is a problem associated with unanticipated inflation?

Accepted Answer

It makes borrowing and lending riskier due to unpredictable real returns.

Question 8

A firm pays its workers an efficiency wage above the market rate. What is the most likely effect?

Accepted Answer

Workers are more productive, but unemployment may increase.

Question 9

Which of the following biases causes the CPI to overstate the true rate of inflation because consumers switch to cheaper alternatives when prices rise?

Accepted Answer

Substitution bias

Question 10

If the labour force participation rate is 65% and the working-age population is 30 million, how many people are in the labour force?

Accepted Answer

$$0.65 	imes 30,000,000 = 19,500,000$$

Question 11

Which of the following statements about the natural rate of unemployment is correct?

Accepted Answer

It consists of frictional and structural unemployment.

Question 12

If a country’s CPI increases from 120 to 122 in one year, what is the annual inflation rate?

Accepted Answer

$$\frac{122 - 120}{120} 	imes 100 = 1.67\%$$

Question 13

Which of the following is NOT a reason why the official unemployment rate may understate true unemployment?

Accepted Answer

It includes people who falsely claim to be looking for work.

Question 14

A worker is laid off during a recession due to falling sales at their company. What type of unemployment are they experiencing?

Accepted Answer

Cyclical unemployment

Question 15

If the CPI in 1993 was 85 and the CPI in 2021 was 141.6, what is the equivalent value in 2021 dollars of a $30,000 salary in 1993?

Accepted Answer

$$30,000 	imes \frac{141.6}{85} = 49$$,941$

Question 16

Which of the following is a direct effect of minimum wage laws on unemployment?

Accepted Answer

They may increase unemployment among teenagers.

Question 17

Why might the Producer Price Index (PPI) provide an early warning of future consumer price inflation?

Accepted Answer

It measures prices of goods and services at all stages of production, including raw materials.

Question 18

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent graduate searching for their first job.

Question 19

Which of the following is a cost of anticipated inflation?

Accepted Answer

Menu costs for firms changing prices frequently.

Question 20

If the employment-population ratio is 60% and the working-age population is 25 million, how many people are employed?

Accepted Answer

$$0.60 	imes 25,000,000 = 15,000,000$$

Unemployment and Inflation: Measurement, Types, and Economic Impacts

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