Q: Suppose the CPI basket cost $$70 in the current period and 50 in $$the base period. What is the Consumer Price Index (CPI) for the current period?

$$ \frac{70}{50} \times 100 = 140 $$

Q: If the CPI last year was 120 and this year it is 132, what is the inflation rate?

$$ \frac{132 - 120}{120} \times 100 = 10\% $$

Q: What is the formula for the employment-to-population ratio?

$$ \frac{\text{Number of employed people}}{\text{Working age population}} \times 100 $$

Q: If the labor force is 200 million and 16 million are unemployed, what is the unemployment rate?

$$ \frac{16}{200} \times 100 = 8\% $$

Question 1

Which of the following best describes the concept of 'natural unemployment'?

Accepted Answer

Unemployment that arises from frictional and structural factors when there is no cyclical unemployment.

Question 2

Suppose the CPI basket cost $$70 in the current period and 50 in $$the base period. What is the Consumer Price Index (CPI) for the current period?

Accepted Answer

$$ \frac{70}{50} 	imes 100 = 140 $$

Question 3

Which of the following is NOT considered a labor market indicator?

Accepted Answer

Consumer Price Index (CPI)

Question 4

If the CPI last year was 120 and this year it is 132, what is the inflation rate?

Accepted Answer

$$ \frac{132 - 120}{120} 	imes 100 = 10\% $$

Question 5

Which scenario best illustrates frictional unemployment?

Accepted Answer

A recent college graduate is searching for their first job after graduation.

Question 6

What is the formula for the employment-to-population ratio?

Accepted Answer

$$ \frac{	ext{Number of employed people}}{	ext{Working age population}} 	imes 100 $$

Question 7

Which of the following is a consequence of high inflation?

Accepted Answer

Redistribution of income from lenders to borrowers

Question 8

If the labor force is 200 million and 16 million are unemployed, what is the unemployment rate?

Accepted Answer

$$ \frac{16}{200} 	imes 100 = 8\% $$

Question 9

Which of the following best describes 'structural unemployment'?

Accepted Answer

Unemployment resulting from changes in technology or foreign competition that alter the skills needed for jobs.

Question 10

What does the 'core inflation rate' attempt to measure?

Accepted Answer

The underlying inflation trend by excluding volatile food and fuel prices.

Question 11

If real GDP per person increases faster than the population grows, what is the likely effect?

Accepted Answer

The standard of living increases.

Question 12

Which of the following is NOT a step in calculating the Consumer Price Index (CPI)?

Accepted Answer

Adjusting for changes in the unemployment rate

Question 13

A discouraged worker is best described as:

Accepted Answer

A person who is not working and has stopped looking for a job because repeated failure to find one has led to discouragement.

Question 14

Which of the following would cause the unemployment rate to understate the true level of unemployment?

Accepted Answer

Excluding marginally attached workers from the labor force.

Question 15

If the real wage rate is $20 and the price level is 2, what is the money wage rate?

Accepted Answer

$$ 20 	imes 2 = 40 $$

Question 16

Which of the following is a direct result of an increase in labor productivity?

Accepted Answer

The production possibilities frontier shifts outward.

Question 17

If nominal consumption expenditure is $$500 billion and real consumption expenditure is 400 $$billion, what is the personal consumption expenditure price index (PCEPI)?

Accepted Answer

$$ \frac{500}{400} 	imes 100 = 125 $$

Question 18

Which of the following is true about full employment?

Accepted Answer

It occurs when all unemployment is frictional and structural, with no cyclical unemployment.

Question 19

The rule of 70 states that the number of years it takes for a variable to double is:

Accepted Answer

$$ \frac{70}{	ext{growth rate}} $$

Question 20

Which of the following would most likely increase the natural unemployment rate?

Accepted Answer

An increase in the rate of structural change in the economy.

Macroeconomics Study Notes: Unemployment, Inflation, and Economic Growth

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