Question 1

Which piece of legislation committed the government to pursuing unemployment policies that are consistent with maintaining price stability?

Accepted Answer

A)  ​The Effective Pricing Act of 1971
B)  ​The Employment Initiative Act of 1998
C)  ​The Employment Act of 1946
D)  ​The Stable Growth Act of 1960

Question 2

If some people who were frictionally unemployed became structurally unemployed instead, the natural rate of unemployment:

Accepted Answer

A)  ​Would increase
B)  ​Would not change
C)  ​Would decrease
D)  ​Would be affected in an unpredictable manner

Question 3

If you were a lender, which of the following unexpected changes in inflation would you prefer once you have issued a long term fixed rate loan?

Accepted Answer

A)  ​An increase from 2% inflation to 6% inflation.
B)  ​An increase from 7% inflation to 10% inflation.
C)  ​A decrease from 14% inflation to 8% inflation.
D)  ​A decrease from 6% inflation to 3%.

Question 4

The average duration of unemployment tends to be longer, the higher the unemployment rate.

Accepted Answer

A) True 
 B)False

Question 5

The official unemployment rate may not reflect the true state of unemployment because:

Accepted Answer

A)  ​Some workers may go through the motions of looking for work to keep their unemployment benefits, but not actually be looking for work.
B)  ​Some people who are working in the underground economy may be classified as unemployed.
C)  ​Some may leave the labor force and go back to school only because job conditions are currently poor.
D)  ​all of the above.

Question 6

If inflation had long been 7% and was therefore expected to continue, then it unexpectedly increased to 4% inflation:

Accepted Answer

A)  ​the real interest rate on loans issued just before the change occurred would decrease by three percentage points.
B)  ​the real interest rate on loans issued just before the change occurred would increase by three percentage points.
C)  ​the real interest rate on loans issued just before the change occurred would not change.
D)  ​none of the above.

Question 7

An unanticipated increase in inflation will:

Accepted Answer

A)  ​redistribute income from employers to workers.
B)  ​redistribute income from lenders to borrowers.
C)  ​redistribute income from borrowers to lenders.
D)  ​do none of the above.

Question 8

Some people working in the underground economy could be counted in labor statistics as unemployed, while others may be counted as not in the labor force.

Accepted Answer

A) True 
 B)False

Question 9

Underemployment occurs when:

Accepted Answer

A)  ​a firm hires fewer than the required number of workers, to save costs.
B)  ​a firm hires workers who do not possess the required skills that the job demands.
C)  ​a worker is over qualified and possesses more skills than what his job demands.
D)  ​a firm hires more than the required number of workers.

Question 10

A federal program aimed at retraining the unemployed workers of the declining auto and steel industries is designed to reduce which type of unemployment?

Accepted Answer

A)  ​seasonal
B)  ​cyclical
C)  ​structural
D)  ​frictional

Question 11

If the economy is operating at the natural rate of unemployment, which of the following is essentially eliminated?

Accepted Answer

A)  ​frictional unemployment
B)  ​structural unemployment
C)  ​cyclical unemployment
D)  ​all of the above

Question 12

The total labor force consists of:

Accepted Answer

A)  ​the entire population.
B)  ​the population over the age of sixteen.
C)  ​the number of officially employed persons.
D)  ​the number of officially employed persons plus the number of officially unemployed persons.

Question 13

Inflation exists whenever:

Accepted Answer

A)  ​the price of a good increases.
B)  ​the price of a good decreases.
C)  ​the economy experiences a contraction.
D)  ​the overall price level is rising.

Question 14

Unemployment resulting from normal turnover in the labor market is called:

Accepted Answer

A)  ​frictional unemployment.
B)  ​cyclical unemployment.
C)  ​structural unemployment.
D)  ​seasonal unemployment.

Question 15

If unemployment benefits became more generous it would be likely to _____ frictional unemployment and _____ the natural rate of unemployment:

Accepted Answer

A)  ​Increase; increase
B)  ​Increase; not change
C)  ​Not change; increase
D)  ​Increase; decrease

Question 16

When unemployment rises above the natural rate it reflects the existence of ____ unemployment.

Accepted Answer

A)  ​frictional
B)  ​structural
C)  ​seasonal
D)  ​cyclical

Question 17

Unemployment that results from an economy-wide downturn is called:

Accepted Answer

A)  ​frictional unemployment.
B)  ​cyclical unemployment.
C)  ​structural unemployment.
D)  ​seasonal unemployment.

Question 18

An individual who voluntarily leaves one job and spends a period of time seeking another is considered:

Accepted Answer

A)  ​frictionally unemployed.
B)  ​cyclically unemployed.
C)  ​structurally unemployed.
D)  ​seasonally unemployed.

Question 19

The existence of discouraged workers:

Accepted Answer

A)  ​increases the size of the labor force, but does not affect the unemployment rate.
B)  ​affects neither the size of the labor force nor the unemployment rate.
C)  ​may cause the official unemployment rate to understate the true amount of unemployment.
D)  ​may cause the official unemployment rate to overstate the true amount of unemployment.

Question 20

If a minimum wage law is passed imposing a price floor above the equilibrium price of unskilled labor:

Accepted Answer

A)  ​the quantity of unskilled labor demanded will exceed the quantity of unskilled labor supplied.
B)  ​the quantity of unskilled labor supplied will equal the quantity of unskilled labor demanded.
C)  ​the quantity of unskilled labor supplied will exceed the quantity of unskilled labor demanded.
D)  ​the demand for unskilled labor will decrease.

Exam 10: Consumer Choice Theory

Unemployment that results from an economy-wide downturn is called:

Correct AnswerverifiedShow Answer

Which piece of legislation committed the government to pursuing unemployment policies that are consistent with maintaining price stability?

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The existence of discouraged workers:

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Some people working in the underground economy could be counted in labor statistics as unemployed, while others may be counted as not in the labor force.

Correct AnswerverifiedShow Answer

If some people who were frictionally unemployed became structurally unemployed instead, the natural rate of unemployment:

Correct AnswerverifiedShow Answer

If the economy is operating at the natural rate of unemployment, which of the following is essentially eliminated?

Correct AnswerverifiedShow Answer

If you were a lender, which of the following unexpected changes in inflation would you prefer once you have issued a long term fixed rate loan?

Correct AnswerverifiedShow Answer

If a minimum wage law is passed imposing a price floor above the equilibrium price of unskilled labor:

Correct AnswerverifiedShow Answer

If inflation had long been 7% and was therefore expected to continue, then it unexpectedly increased to 4% inflation:

Correct AnswerverifiedShow Answer

The average duration of unemployment tends to be longer, the higher the unemployment rate.

Correct AnswerverifiedShow Answer

Unemployment resulting from normal turnover in the labor market is called:

Correct AnswerverifiedShow Answer

A federal program aimed at retraining the unemployed workers of the declining auto and steel industries is designed to reduce which type of unemployment?

Correct AnswerverifiedShow Answer

If unemployment benefits became more generous it would be likely to _____ frictional unemployment and _____ the natural rate of unemployment:

Correct AnswerverifiedShow Answer

When unemployment rises above the natural rate it reflects the existence of ____ unemployment.

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The official unemployment rate may not reflect the true state of unemployment because:

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Inflation exists whenever:

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Underemployment occurs when:

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An individual who voluntarily leaves one job and spends a period of time seeking another is considered:

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An unanticipated increase in inflation will:

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The total labor force consists of:

Correct AnswerverifiedShow Answer

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If unemployment benefits became more generous it would be likely to _ frictional unemployment and _ the natural rate of unemployment:

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