Question

QUESTION 1 The best example of a "frictionally unemployed" worker is one who reduces productivity by causing friction in a business. is laid off during a recessionary period in the economy. is in the process of voluntarily switching jobs. is discouraged and not actively seeking work. 4 points

QUESTION 2 Full-Time Employed = 80 Part-Time Employed = 25 Unemployed = 15 Discouraged Workers = 5 Members of Underground Economy = 6 Consumer Price Index = 110 Refer to the given information about a hypothetical economy. The rate of inflation is 110 percent. is 10 percent. is 0 percent. cannot be determined from the data. 4 points

QUESTION 3 Which of the following statements is correct? For a given real interest rate, the nominal interest must decrease if expected inflation increases. For a given nominal interest rate, the real interest will decrease if inflation decreases. For a given expected inflation rate, the nominal interest must increase if real interest decreases. For a given real interest rate, the nominal interest must increase if expected inflation increases. 4 points

QUESTION 4 Unemployed 7 Total Population 145 Employed 95 Discouraged Workers 3 The table contains information about the hypothetical economy of Scoob. All figures are in millions. If the natural rate of unemployment in Scoob is 5 percent, then structural unemployment is about 3 percent. frictional unemployment is about 2 percent. cyclical unemployment is about 2 percent. hidden unemployment is about 5 percent. 4 points

QUESTION 5 Unemployed 7 Total Population 145 Employed 95 Discouraged Workers 3 The table contains information about the hypothetical economy of Scoob. All figures are in millions. The unemployment rate in Scoob is 2.5 percent. 3.2 percent. 5.0 percent. 6.9 percent. 4 points QUESTION 6 Okun's law measures the trade-off between the rate of inflation and the rate of unemployment. indicates the number of years it will take for a constant rate of inflation to double the price level. quantifies the relationship between nominal and real incomes. shows the relationship between the unemployment rate and the size of the negative GDP gap. 4 points QUESTION 7 Unanticipated inflation arbitrarily "subsidizes" those who receive fixed money incomes. "taxes" those who receive fixed money incomes. "penalizes" those who borrow money. "benefits" those who save money. 4 points

QUESTION 8 The labor force includes employed workers and persons who are officially unemployed. employed workers but excludes persons who are officially unemployed. full-time workers but excludes part-time workers. permanent employees but excludes temporary employees. 4 points

QUESTION 9 A peak in the business cycle occurs when the unemployment rate is its greatest. occurs when the inflation rate is its lowest. is a temporary maximum point. is a temporary minimum point. 4 points

QUESTION 10 Search and wait unemployment is another way to describe noncyclical unemployment. cyclical unemployment. frictional unemployment. structural unemployment. 4 points

QUESTION 11 (Consider This) Which of the following best explains why unemployment rises significantly during a recession? Wages are sticky both upward and downward. Wages are flexible both upward and downward. Wages are flexible upward but sticky downward. Wages are sticky upward but flexible downward. 4 points

QUESTION 12 Unemployment rates for skilled workers compared to unemployment rates for unskilled workers are lower, because skilled workers tend to be employed in less cyclically vulnerable industries, such as the services and nondurable goods industries. higher, because skilled workers tend to be employed in more cyclically vulnerable industries, such as the durable goods industry. higher, because businesses are less likely to retain the more costly skilled workers no matter what type of industry. lower, because skilled workers tend to be primarily employed by government at the local, state, and federal levels. 4 points

QUESTION 13 Governments imposing negative nominal interest rates are attempting to discourage the use of banks. compete with private banks in the lending market. discourage consumption and encourage saving. encourage consumption by discouraging saving. 4 points

QUESTION 14 Real income can be determined by dividing the price level by nominal income. inflating nominal income for inflation. dividing the annual rate of inflation into the number "70." deflating nominal income for inflation. 4 points

QUESTION 15 (Consider This) Which of the following statements is most accurate about economists’ concerns about deflation? Economists are not concerned about deflation because consumers benefit from the lower prices. Central banks will encourage deflation by keeping interest rates too low. Deflation can lead to bankruptcies that trigger a downward deflationary spiral. Deflation will make a nation’s exports less attractive to foreign buyers. 4 points

QUESTION 16 If the real interest rate and the nominal interest rate are both negative and equal to each other, then the inflation premium is zero. inflation premium is also negative. inflation premium is positive. economy must be in a recession. 4 points

QUESTION 17 Cost-push inflation tends to be characterized by all of the following, except rising general price level. falling real output. being automatically self-limiting. falling unemployment. 4 points

QUESTION 18 Which of the following is a correct statement? It is relatively easy to distinguish between cost-push and demand-pull inflation even if you don't know the source of the inflation. A supply shock will cause a variation of demand-pull inflation that can lead to hyperinflation. Demand-pull inflation will continue so long as there is excess total spending in the economy. Demand-pull inflation is usually accompanied by higher unemployment rates. 4 points

QUESTION 19 Which of the following formulas is correct? Percentage change in price level approximates percentage change in real income minus percentage change in nominal income. real income approximates percentage change in nominal income minus percentage change in price level. nominal income approximates percentage change in price level minus percentage change in real income. real income approximates percentage change in price level minus percentage change in nominal income. 4 points

QUESTION 20 In the aftermath of the Great Recession, several governments engineered a negative nominal interest rate. Using the formula that relates nominal interest and real interest, negative nominal rates could imply any of the following, except negative inflation premium or negative real interest rates. zero inflation premium and negative real interest rates. zero inflation premium and high positive real interest rates. low inflation premium and a significantly negative real interest. 4 points

QUESTION 21 In the depth of the Great Depression, the unemployment rate in the United States was about 15 percent. 33 percent. 25 percent. 40 percent. 4 points

QUESTION 22 The CPI compiled by the Bureau of Labor Statistics is used in the computations for the unemployment rate. the inflation rate. the interest rate. the foreign exchange rate. 4 points

QUESTION 23 Suppose there are 10 million part-time workers and 90 million full-time workers in an economy. Five million of the part-time workers switch to full-time work. As a result, the official unemployment rate will fall. the official unemployment rate will rise. the official unemployment rate will remain unchanged. the size of the labor force will increase. 4 points

QUESTION 24 Full-Time Employed = 80 Part-Time Employed = 25 Unemployed = 15 Discouraged Workers = 5 Members of Underground Economy = 6 Consumer Price Index = 110 Refer to the given information about a hypothetical economy. If members of the underground economy are currently counted as part of the unemployed when in fact they are employed, the official unemployment rate is overstated by about 0 percentage points. 2 percentage points. 5 percentage points. 6 percentage points. 4 points

QUESTION 25 Suppose that lenders want to receive a real rate of interest of 5 percent and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of 2 percent. 3 percent. 5 percent. 7 percent.

Answer 1

1. The best example of a "frictionally unemployed" worker is  is in the process of voluntarily switching jobs.Frictional unemployment is a type of unemployment. It is sometimes called search unemployment and can be based on the circumstances of the individual. It is time spent between jobs when a worker is searching for a job or transferring from one job to another.

2. The inflation rate cannot be determined from the data. To calculate inflation rate from CPI, we take Consumer Price Index from the current index and divide by last year's number and multiply the result by 100 and add a % sign. Here CPI for only one year is given.

3. The correct option is option 4. For a given real interest rate, the nominal interest must increase if expected inflation increases. Real interest rate = Nominal interest rate − Inflation rate.

Suppose real rate is 4% and inflation is 1% then

nominal rate is equal to real rate + inflation = 4 + 1 = 5%

Suppose inflation rise to 2%, then

nominal rate will be 2 + 4 = 6%

4. Question is not clear.

5. Unemployment Rate = (Total Unemployed / Total Labor Force) / 100

  Total Unemployed = 7, Labor Force = Employed + Unemployed = 7 + 95 = 102

Unemployment Rate = ( 7/102) * 100 = 6.9%