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In an economy with 100 million people, 70 million hold jobs and 10 million are not working but are looking for jobs. The number counted as unemployed is
Choose one answer.



 
a. 70 million.
 


 
b. 30 million.
 


 
c. 10 million.
 


 
d. 80 million.
 


 
e. 60 million.


C
Which of the following statements about an economy operating at full employment is correct?
Choose one answer.



 
a. When the economy is operating at full employment the unemployment rate will equal the frictional rate plus the structural rate
 


 
b. When the economy is operating at full employment there will still be some cyclical unemployment in the economy.
 


 
c. When the economy is operating at full employment the unemployment rate will equal the frictional rate plus the cyclical rate
 


 
d. When the economy is operating at full employment the unemployment rate will equal the structural rate plus the cyclical rate
 


 
e. When the economy is operating at full employment there is no unemployment in the economy


A
In many large retail stores, price markdowns are now determined by computer. The "middle managers" who used to make these decisions personally became __________ unemployed.
Choose one answer.



 
a. frictionally
 


 
b. naturally
 


 
c. cyclically
 


 
d. structurally


D
In an economy with 100 million people, 64 million hold jobs and 4.7 million are not working but are looking for jobs. The unemployment rate is __________.

Choose one answer.



 
a. 7.3 percent
 


 
b. 13.1 percent
 


 
c. 4.7 percent
 


 
d. 15.0 percent
 


 
e. 6.8 percent
 



E
The cyclical unemployment rate is defined as the __________ unemployment rates.
Choose one answer.



 
a. sum of the natural and the frictional
 


 
b. difference between the existing (actual) and the natural
 


 
c. sum of the structural and the frictional
 


 
d. difference between the structural and the frictional


B
The unemployment due to the time it takes for unemployed people to locate a job utilizing their transferable skills is called __________ unemployment.
Choose one answer.



 
a. frictional
 


 
b. natural
 


 
c. cyclical
 


 
d. structural


A
The natural rate of unemployment

Choose one answer.



 
a. equals the rate of frictional unemployment plus the rate of structural unemployment
 


 
b. is zero
 


 
c. equals the rate of structural unemployment plus the rate of cyclical unemployment
 


 
d. equals the rate of frictional unemployment plus the rate of cyclical unemployment
 



A

Jones lost his job in industry A, but he has skills that can be transferred to industry B (which is currently hiring). Smith lost a job in industry C, but his skills cannot be transferred to industry B or to any other industry. Jones is __________ unemployed and Smith is __________ unemployed.

Choose one answer.



 
a. structurally; frictionally
 


 
b. frictionally; frictionally
 


 
c. frictionally; structurally
 


 
d. structurally; structurally
 




 
C
Which of the following is one of the three main macroeconomic goals that the government seeks to achieve?
Choose at least one answer.



 
a. full employment
 


 
b. a balanced federal budget
 


 
c. stable interest rates
 


 
d. avoidance of a large foreign trade deficit
 


 
e. economic growth
 


 
f. unemployment rates very close to zero
 


 
g. low prices
 


 
h. price level stability


A, E, H
"Full employment" is said to exist when the unemployment rate equals
Choose one answer.



 
a. the natural unemployment rate.
 


 
b. zero.
 


 
c. the structural unemployment rate.
 


 
d. the cyclical unemployment rate.


A
If unemployed people who have been looking for work become discouraged workers and stop looking for work

Choose one answer.



 
a. the unemployment rate will decrease
 


 
b. the production possibilities frontier will shift out (away from the origin)
 


 
c. the unemployment rate will increase
 


 
d. this will have no effect on the unemployment rate since these people are still unemployed
 



A
Assume that the economy is in a recession and John is unemployed. He is confident that he will be able to find work as soon as the recession ends. John is an example of

Choose one answer.



 
a. cyclical unemployment
 


 
b. temporary unemployment that results from the fact that he has imperfect information about the labor market
 


 
c. frictional unemployment
 


 
d. structural unemployment
 



A
Which of the following statements is  correct?
Choose at least one answer.



 
a. cyclical unemployment does not exist if the economy is operating at full employment
 


 
b. frictional unemployment is temporary unemployment due to inadequate aggregate demand for labor
 


 
c. the natural rate of unemployment equals the frictional rate plus the cyclical rate
 


 
d. “discouraged workers” are counted as being unemployed if they are willing to work
 


 
e. the natural rate of unemployment is the lowest sustainable unemployment rate
 


 
f. when the economy is at full employment there will be no cyclical unemployment
 


 
g. because of an increase in the number of discouraged workers, the unemployment rate can sometimes fall when the economy is moving into recession
 


 
h. structural unemployment is short term unemployment that increases during periods of recession


A, E, F, G
The unemployment due to changes in the types of skills employers require is called __________ unemployment.
Choose one answer.



 
a. natural
 


 
b. cyclical
 


 
c. frictional
 


 
d. structural


D
You are a highly skilled television repairman. Unfortunately for you, the televisions you know how to repair have been replaced by a new type about which you know nothing. As a result, you are now unemployed.

Choose one answer.



 
a. You are an example of cyclical unemployment
 


 
b. You are an example of structural unemployment
 


 
c. You are an example of frictional unemployment
 


 
d. You are an example of temporary unemployment that results from the fact that you have imperfect information about the labor market
 



B

The three major economic goals are

Choose one answer.



 
a. price stability, full employment and high economic growth.
 


 
b. sustained prices, employment stability and high economic growth.
 


 
c. price stability, income stability and economic growth.
 


 
d. high price stability, growth control and low unemployment.
 




 
A
If the economy is operating on its production possibilities frontier this tells us that

Choose one answer.



 
a. the current unemployment rate is less than the natural rate of unemployment
 


 
b. is no structural unemployment
 


 
c. there is no unemployment of any kind
 


 
d. there is no cyclical unemployment
 


 
e. there is no frictional unemployment
 



D

Which of the following statements is false?

Choose one answer.



 
a. The natural unemployment rate is greater than the structural unemployment rate.
 


 
b. A discouraged worker is counted as an unemployed worker.
 


 
c. all of the statements are true
 


 
d. all of the statements are false
 


 
e. The natural unemployment rate is greater than the frictional unemployment rate.
 




 
D
In an economy with 210 million people, 105 million hold jobs and 52.5 million are not working but are looking for jobs. The number counted as unemployed is
52.5 million
The word prices refers to a
simple price
A weighted average of the pices of all goods and services
price level
A measue of the price level
price index
Economics measure the price level by
constructing a price index
The weighted average prices of a specific set of goods and services purchased by a typical household; a widely cited index number for the price level
Consumer Price Index (CPI)
CPI is based on a representative group of goods and services called the _______, purchased by a typical household
market basket
What are the 8 categories (market basket) o goods and services?
1. food and beverage
2. housing
3. apparel
4. transportation
5. medical care
6. recreation
7. education and communication
8. other goods and services
To find the CPI
CPI = (total dollar expenditure on market basket in current year / total dollar expenditure on market basket in base year) x 100
The year chosen as a point of reference or basis of comparison for prices in other years; a benchmark year
base year
To find the percentage change in prices
percentage change in prices = (CPIlateryear -CPIearlier year / CPIearlieryear) x 100
An increase in the price level
Inflation
the positive percentage change in the price level on an annual level
Inflation rate
Nominal income adjusted for price changes
Real income
The current dollar amount of a person's income
Nominal income
To find real income
Real income = (nominal income/ CPI) x 100
Another price index is often called
the GDP deflator or the GDP implicit price deflator
The CDP implicit price deflator, unlike CPI, is based on
all goods and services produced in an economy
2 groups of the civilian noninstitutional population
not in the labor force, and persons in the civilian labor force
To find civilian noninstitutional population
civilian noninstitutional population = persons not in the labor force + persons in the labor force
Persons neither working nor looking for work
persons not in the labor force
Persons in the civilian labor force fall into one of 2 categories:
employed or unemployed
To find civilian labor force
civilian labor force = employed persons + unemployed persons
The percentage of the civilian force that is employed
Unemployment rate
To find unemployment rate
unemployment rate = # of unemployed persons / civilian labor force
The percentage of the civilian noninstitutional population that is employed
employment rate
To find employment rate
employment rate = # of employed persons / civilian labor force
The percentage of the civilian noninstitutional population that is the civilian labor force
labor force participation rate
To find labor force participation rate
LFPR = civilian labor force / civilian noninstitutional population
Unemployment and employment rates do not add up to ____ because the denominator of the unemployment rate is not the same as the denominator in the employment rate
100%
What are the 4 categories that an unemployed person can fall into?
Job loser, job leaver, reentrant, new entrant
Unemployment that is due to the natural so-called frictions in the economy and that is caused by changing market conditions and represented by qualified individuals with transferable skills who change jobs
frictional unemployment
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