Question

Expansionary monetary policy involves:

Select one:

a. all of the above.

b. a reduction in interest rates.

c. an increase in the money supply.

d. an increase in business and consumer purchases.

The consumer price index (CPI) is generally assumed by economists to:

Select one:

a. understate the inflation rate.

b. overstate the inflation rate.

c. none of the above.

d. measure inflation extremely accurately.

The unemployment rate is calculated as:

Select one:

a. all people without jobs, as a percentage of the population.

b. the percent of the population that is unemployed.

c. the percent of the labor force that is unemployed.

d. all people without jobs, as a percentage of the labor force.

A middle-aged autoworker is laid off from his job after improved technology (robotics) reduces the need for workers. This type of unemployment is:

Select one:

a. cyclical.

b. none of the above.

c. structural.

d. frictional.

Depending on which range of the three-range aggregate supply curve that experiences an increase in aggregate demand,

Select one:

a. the average price level but not GDP can increase.

b. both GDP and the average price level can increase.

c. GDP but not the average price level can increase.

d. all of the above

Answer 1

1) an expansionary monetary policy involves an increase in the money supply and consequently a decrease in the interest rates. A decrease in interest rate in turn leads to increase in business and consumer purchases. Therefore, an expansionary monetary policy involves all of the above.

Hence, option a is correct.

2) the consumer price index is generally assumed by the economists to overstate the inflation rate because of Substitution and Quality bias.

Hence, option b is correct.

3) the unemployment rate is calculated as the the percentage of the labour force that is unemployed. All people without jobs are not unemployed as per are definition of Unemployment because there may be retired persons and underage children which are without jobs. But taking them all as Percentage of Labour Force doesn't make sense. Therefore the unemployment rate is calculated as the percentage of the labour force that is unemployed.

Hence, option c is correct.

4) A middle-aged auto worker is laid off from his job after improved Technology reduces the need for workers. This type of unemployment is structural.

Therefore, option c is correct.

5) depending on which range of the the three range aggregate supply curve that experiences an increase in aggregate demand the average price level but not GDP can increase, Both GDP and the price level can increase and GDP but not the average price level can increase. Therefore, all of the above are correct

Hence, option d is correct