Q: Suppose the working-age population in a country is 250 million, the labor force is 160 million, and 10 million people are unemployed. What is the unemployment rate in this country?

$$\frac{10}{160} \times 100 = 6.25\%$$

Q: If the Consumer Price Index (CPI) was 120 in 2020 and 132 in 2021, what was the inflation rate between 2020 and 2021?

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

Question 1

Suppose the working-age population in a country is 250 million, the labor force is 160 million, and 10 million people are unemployed. What is the unemployment rate in this country?

Accepted Answer

$$\frac{10}{160} 	imes 100 = 6.25\%$$

Question 2

Which of the following best describes structural unemployment?

Accepted Answer

Unemployment that arises from a persistent mismatch between the skills of workers and the requirements of jobs.

Question 3

If the Consumer Price Index (CPI) was 120 in 2020 and 132 in 2021, what was the inflation rate between 2020 and 2021?

Accepted Answer

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

Question 4

Which of the following is NOT a problem with the official unemployment rate as measured by the BLS?

Accepted Answer

It includes discouraged workers as unemployed.

Question 5

A worker who lost their job at a typewriter factory because computers replaced typewriters is experiencing which type of unemployment?

Accepted Answer

Structural unemployment

Question 6

If the nominal interest rate on a loan is 7% and the inflation rate is 3%, what is the real interest rate?

Accepted Answer

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

Question 7

Which of the following government policies is most likely to increase the natural rate of unemployment?

Accepted Answer

Increasing the generosity and duration of unemployment insurance benefits

Question 8

Why might the Producer Price Index (PPI) provide an early warning of future movements in consumer prices?

Accepted Answer

Because increases in producer costs are often passed on to consumers as higher prices.

Question 9

Suppose a worker is available for work but has not looked for a job in the past four weeks because they believe no jobs are available for them. How are they classified in official U.S. labor statistics?

Accepted Answer

Discouraged worker, not in the labor force

Question 10

If all prices and wages in an economy double overnight, but not all at the same rate, which of the following is most likely to occur?

Accepted Answer

Some people will see their real wage increase, while others will see it decrease.

Question 11

Which of the following is an example of frictional unemployment?

Accepted Answer

A recent college graduate searching for their first job

Question 12

A firm pays its workers an above-market wage to increase productivity. This is an example of:

Accepted Answer

Efficiency wage

Question 13

If the labor force participation rate is declining, which of the following is most likely occurring?

Accepted Answer

A smaller percentage of the working-age population is either employed or actively seeking work.

Question 14

Which of the following is a cost of anticipated inflation?

Accepted Answer

Menu costs for firms

Question 15

Suppose the CPI in 1990 was 130 and in 2020 it was 260. If your mother earned $40,000 in 1990, what is the equivalent in 2020 dollars?

Accepted Answer

$$40,000 	imes \frac{260}{130} = 80$$,000$

Question 16

Which of the following is most likely to be included in the labor force?

Accepted Answer

A person who is actively looking for work but is currently unemployed

Question 17

During a recession, which type of unemployment typically increases the most?

Accepted Answer

Cyclical unemployment

Question 18

Which of the following biases is NOT a problem with the Consumer Price Index (CPI)?

Accepted Answer

Interest rate bias

Question 19

If a country has a high minimum wage relative to the equilibrium wage, what is a likely effect on the labor market?

Accepted Answer

An increase in unemployment among low-skilled workers

Question 20

Which of the following statements about labor unions in the United States is correct?

Accepted Answer

Labor unions are not a significant cause of unemployment because only a small percentage of private sector workers are unionized.

chapter 9

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