Q: Suppose the cost of a market basket in the base year is $$1,200 and in the current year is 1$$,500. What is the price index for the current year?

$$\frac{1,500}{1,200} \times 100 = 125$$

Q: If the unemployment rate is calculated as $$\frac{\text{Number of Unemployed}}{\text{Labor Force}} \times 100$$, what is the unemployment rate if there are 8 million unemployed and 192 million employed?

$$\frac{8}{200} \times 100 = 4\%$$

Q: If the cost of a market basket in 2010 was $$1,000 and in 2020 it is 1$$,400, what is the inflation rate over this period?

$$\frac{1,400 - 1,000}{1,000} \times 100 = 40\%$$

Question 1

Suppose the cost of a market basket in the base year is $$1,200 and in the current year is 1$$,500. What is the price index for the current year?

Accepted Answer

$$\frac{1,500}{1,200} 	imes 100 = 125$$

Question 2

Which of the following best describes structural unemployment?

Accepted Answer

Unemployment resulting from a mismatch between workers’ skills and the requirements of available jobs

Question 3

If the nominal interest rate is 7% and the expected inflation rate is 3%, what is the real interest rate?

Accepted Answer

$$7\% - 3\% = 4\%$$

Question 4

Which of the following individuals would be classified as a discouraged worker?

Accepted Answer

Someone who has stopped looking for work because they believe no suitable jobs are available

Question 5

During a period of unanticipated inflation, who is most likely to benefit?

Accepted Answer

Debtors who have borrowed money at fixed interest rates

Question 6

Which of the following is NOT included in the official U.S. labor force?

Accepted Answer

A 30-year-old who has given up looking for work

Question 7

If the unemployment rate is calculated as $$\frac{	ext{Number of Unemployed}}{	ext{Labor Force}} 	imes 100$$, what is the unemployment rate if there are 8 million unemployed and 192 million employed?

Accepted Answer

$$\frac{8}{200} 	imes 100 = 4\%$$

Question 8

Which price index is considered the broadest measure of prices in the U.S. economy?

Accepted Answer

GDP deflator

Question 9

A country experiences a sustained decrease in the average price level of goods and services. This is best described as:

Accepted Answer

Deflation

Question 10

Which of the following is a leading indicator that may signal an upcoming economic downturn?

Accepted Answer

A reduction in the average workweek

Question 11

Which type of unemployment is most likely to increase during a recession?

Accepted Answer

Cyclical unemployment

Question 12

If the cost of a market basket in 2010 was $$1,000 and in 2020 it is 1$$,400, what is the inflation rate over this period?

Accepted Answer

$$\frac{1,400 - 1,000}{1,000} 	imes 100 = 40\%$$

Question 13

Which of the following best explains why the Consumer Price Index (CPI) may overstate inflation?

Accepted Answer

It does not update the set of items to reflect new or improved products

Question 14

A worker who voluntarily quits their job to search for a better one is experiencing which type of unemployment?

Accepted Answer

Frictional unemployment

Question 15

Which of the following statements about the natural rate of unemployment is correct?

Accepted Answer

It is the unemployment rate when the economy is at long-run equilibrium

Question 16

Suppose a country’s labor force participation rate increases due to more people engaging in informal work. What is the likely effect on the official unemployment rate if these workers are not counted as employed?

Accepted Answer

The unemployment rate will be overstated

Question 17

Which of the following best describes the difference between nominal and real values?

Accepted Answer

Real values are adjusted for inflation; nominal values are not

Question 18

A contract includes a cost-of-living adjustment (COLA) clause. What is the main purpose of this clause?

Accepted Answer

To adjust nominal values to account for changes in the cost of living

Question 19

Which of the following is an example of a 'menu cost' associated with inflation?

Accepted Answer

The cost of recalculating and printing new price lists

Question 20

During a business cycle, what is the term for the point at which economic activity reaches its highest level before beginning to decline?

Accepted Answer

Peak

Macroeconomics Study Guide: Unemployment, Inflation, and Deflation

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