Question

21. Oil shocks, the shift from manufacturing to service jobs, and the use of new technologies are reasons for ___ unemployment.

A permanent B structural C cyclical D frictional

22. In a country where both the labor force participation rate and the unemployment rate are very low, which of the following answers explains why this may be the case?

A a large percentage of the population is employed B a large percentage of the population consist of children

C a large percentage of the population is unemployed D a large percentage of the population is aging and thus has retired

23. A real price is:

A an increase in the average level of the price of a good B the average number of times a dollar is spent on final goods and services in a year

C a price that has been corrected for inflation D a decrease in the average level of the price of a good

24. When the U.S government borrows, it sells:

A treasury bonds B federal paper C federal paper, treasury bonds, and government stocks D government stocks

25. The most basic U.S. employment law stipulates that an employee may quit and employer may fire at any time and for any reason is called:

A the Equal Employment Opportunity Act B the employee privacy law C affirmative action D the employment at will doctrine

26. Which of the following can drive long run economic growth in the Solow model?

A human capital B real capital C technological knowledge D physical capital

27. The consumer price index measures the:

A average price of a basket of goods and services bought by all families in the country B average price of a basket of goods and services bought by a typical consumer

C total price of a basket of goods and services bought by all families in the country D total price of a basket of goods and services bought by a typical consumer

28. The social benefits of research and development are equal to the private benefits.

True or False

29. The quantity theory of money predicts that if the money supply doubles, the price level will also double.

True or False

30. When it occurs at the industry level, Joseph Schumpeter's "creative destruction" results in:

A cyclical unemployment B Structural unemployment C frictional unemployment D underemployment

Answer 1

Ans 21. Option B

Structural unemployment, it is the unemployment due to reorganisation of the industry mainly due to technological change and not due to change in demand or supply.

Ans 22. Option D

As the large population has retired, so, labour force participation and unemployment rate is low

Ans 23. Option C

Real price is the inflation adjusted price

Ans 24. Option A

Treasury bonds are issued to sponsor the government deficits

Ans 25. Option D

It is the contractual relationship between the employer and the employee, wherein the employee may quit or employer may terminate him/her until the reason is illegal

Ans 26. Option c

Other factors listed have a level effect and not growth effect.

Ans 27. Option A

It is weighted average of basket of goods bought by the families

Ans 28 False

The benefit of research and development not only benefits the person who does the research and development but has a positive externality as it leads to innovation and increase in knowledge in the economy, thus, having a greater social benefit

Ans 29 True

In long run, increase in money supply only effects the inflation and has no affect on real variables, this is called classical dichotomy

Ans 30 Option c

Crsative destruction represents the process in which new discoveries lead to development of new industries which will require employees with a new set of skill set, thus, obsolete firms will lay off workers and new industries will employ workers but often the time of lay offs and new employment doesn’t match leading to frictional unemployment.

*Please don’t forget to hit the thumbs up button, if you find the answer helpful.