Question 1

Unanticipated inflation creates problems for society because

Accepted Answer

A)  it increases the wealth of people who hold cash
B)  it promotes social cooperation by encouraging self-restraint
C)  it reduces the desire to plan and reduces the complexity of planning
D)  it redistributes wealth and income
E)  it requires buyers to spend less time acquiring information about prices

Question 2

The only job Justin ever holds is preparing income tax forms at H&R Block from January 2 to April 15. In March, while he is still working, he sends his resume to prospective employers. In March, he was counted as

Accepted Answer

A)  cyclically unemployed
B)  structurally unemployed
C)  frictionally unemployed
D)  part of the labor force
E)  out of the labor force

Question 3

If the aggregate supply curve shifts leftward,

Accepted Answer

A)  the price level increases and output increases
B)  the resulting increase in the price level is usually called cost-push inflation
C)  the resulting increase in the price level is usually called demand-pull inflation
D)  the price level increases only if there is also a rightward shift of the aggregate demand curve
E)  the price level decreases and output increases

Question 4

An occupation with a high unemployment rate is

Accepted Answer

A)  professionals in general
B)  attorneys
C)  technical workers in general
D)  auto workers
E)  Web page designers

Question 5

Inflation rates differ across regions mostly because of differences in housing prices.

Accepted Answer

A) True 
 B)False

Question 6

Since World War II, the Consumer Price Index has increased by an average of

Accepted Answer

A)  1.4% per year
B)  2.1% per year
C)  6.4% per year
D)  5.6% per year
E)  3.9% per year

Question 7

The labor force consists of all adults who are currently employed.

Accepted Answer

A) True 
 B)False

Question 8

An increase in a person's real wage necessarily means

Accepted Answer

A)  greater purchasing power
B)  a lower nominal wage
C)  a lower nominal wage after payment of taxes
D)  a higher nominal wage
E)  a higher nominal wage after payment of taxes

Question 9

The unemployment rate rises any time there is an increase in the number of unemployed.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would lead to the most inflation?

Accepted Answer

A)  Both aggregate demand and aggregate supply increase.
B)  Both aggregate demand and aggregate supply decrease.
C)  Aggregate demand increases and aggregate supply decreases.
D)  Aggregate demand increases and aggregate supply increases.
E)  Aggregate supply decreases.

Question 11

Full employment is considered a major economic goal because

Accepted Answer

A)  specialization is not possible without full employment
B)  economic growth can only occur when there is full employment
C)  the opportunity cost of unemployment is lost production
D)  comparative advantage is not possible without full employment
E)  inflation will be lower when full employment is achieved

Question 12

An accountant who lost their job in the last recession who gives up looking for work after 12 months of unsuccessful job search, would be considered as

Accepted Answer

A)  a discouraged worker
B)  underemployed
C)  not in the labor force
D)  unemployed
E)  both a and c

Question 13

During inflationary times, which of the following is unlikely to happen?

Accepted Answer

A)  People change their expectations about the inflation rate.
B)  Workers try to get increases in nominal wages.
C)  People are willing to lend money for longer periods.
D)  Relative price changes become harder to recognize.
E)  People buy physical assets as a hedge against rising prices.

Question 14

If nominal wages increase 7 percent while the price level rises by 5 percent, real wages rise.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not consistent with full employment?

Accepted Answer

A)  an unemployment rate of 5 percent or 6 percent
B)  seasonal unemployment
C)  structural unemployment
D)  cyclical unemployment
E)  frictional unemployment

Question 16

Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

Accepted Answer

A)  Your real wage fell.
B)  Your nominal wage fell.
C)  Both your nominal and real wages decreased.
D)  Although your nominal wage fell, your real wage increased.
E)  Both your nominal and real wages increased.

Question 17

During periods when the inflation rate fluctuates widely,

Accepted Answer

A)  all relative prices increase at the same rate, leaving money prices constant
B)  all money prices rise at the same rate, causing relative prices to increase
C)  economic efficiency increases because decision makers pay closer attention to changes in money prices
D)  uncertainty about changes in relative prices causes a decrease in economic efficiency
E)  all money prices increase at the same rate, leaving relative prices constant

Question 18

Suppose the official unemployment rate is 10 percent. We can conclude without question that

Accepted Answer

A)  the same 10 percent of the people in the economy were out of work for the entire year
B)  one of every ten people in the labor force is currently unemployed
C)  the same 10 percent of the people in the labor force were out of work for the entire year
D)  every person in the labor force was out of work for 10 percent of the year
E)  10 percent of the people in the economy were each out of work for 10 percent of the year

Question 19

During periods of inflation, the real value (purchasing power) of a given amount of nominal dollars decreases.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following people is least likely to be hurt by inflation?

Accepted Answer

A)  a salesperson who works on commission
B)  a retired couple living on a pension
C)  an individual who works under a labor contract calling for a fixed wage for the next three years
D)  an individual who contracts to lend money for a fixed rate of interest for the next three years
E)  an individual working at the minimum wage (which seldom changes)

Exam 8: Unemployment and Inflation

Inflation rates differ across regions mostly because of differences in housing prices.

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An accountant who lost their job in the last recession who gives up looking for work after 12 months of unsuccessful job search, would be considered as

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Which of the following would lead to the most inflation?

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During periods of inflation, the real value (purchasing power) of a given amount of nominal dollars decreases.

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Full employment is considered a major economic goal because

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An occupation with a high unemployment rate is

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The unemployment rate rises any time there is an increase in the number of unemployed.

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Since World War II, the Consumer Price Index has increased by an average of

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Suppose the official unemployment rate is 10 percent. We can conclude without question that

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During inflationary times, which of the following is unlikely to happen?

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The only job Justin ever holds is preparing income tax forms at H&R Block from January 2 to April 15. In March, while he is still working, he sends his resume to prospective employers. In March, he was counted as

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Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2 percent. Which of the following is true?

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An increase in a person's real wage necessarily means

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Which of the following people is least likely to be hurt by inflation?

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Which of the following is not consistent with full employment?

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If nominal wages increase 7 percent while the price level rises by 5 percent, real wages rise.

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Unanticipated inflation creates problems for society because

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The labor force consists of all adults who are currently employed.

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If the aggregate supply curve shifts leftward,

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During periods when the inflation rate fluctuates widely,

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