Principles of Macroeconomics

Homework Assignment 6

 

Multiple Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

 

____    1.   1. The natural rate of unemployment is the

a.

unemployment rate that would prevail with zero inflation.

b.

rate associated with the size of labor force.

c.

difference between the long-run and short-run unemployment rates.

d.

amount of unemployment that the economy normally experiences.

 

 

____    2.   2. Cyclical unemployment refers to

a.

the relation between the probability of unemployment and a worker's changing level of experience.

b.

how often a worker is likely to be employed during her lifetime.

c.

fluctuations of unemployment around its natural rate.

d.

long-term trends in unemployment.

 

 

____    3.   3. The labor force

a.

equals the number of people employed.

b.

equals the number of people employed plus the number of people unemployed.

c.

equals the non-institutionalized adult population.

d.

equals the number of people employed plus the number of people cyclically unemployed.

 

 

____    4.   4. Jack is a full-time unpaid homemaker not currently searching for other work. Jill is a full-time student who is not looking for a job. Who does the BLS count in the labor force?

a.

only Jack

b.

only Jill

c.

both Jack and Jill

d.

neither Jack nor Jill

 

 

____    5.   5. Who of the following would be counted as unemployed according to official statistics?

a.

Mary, who is waiting for her new job to start

b.

Karen, who worked only 35 hours last week

c.

Shasta, who neither has a job nor is looking for one

d.

None of the above would be counted as unemployed.

 

 

____    6.   6. Who would be included in the labor force?

a.

Dakota, an unpaid homemaker not looking for other work

b.

Brad, a full-time student not looking for work

c.

Maggie, who does not have a job, but is looking for work

d.

None of the above is included in the labor force.

 

 

____    7.   7. Which of the following definitions is correct?

a.

Labor force = number of employed.

b.

Labor force = population - number of unemployed.

c.

Unemployment Rate = (number of unemployed  [labor force])  100%.

d.

Unemployment Rate = (number of unemployed  adult population)  100%.

 

 

 

 

 

 

Labor Stats

The Labor Market

This table shows the 2003 data for males and females ages 16 and over in the imaginary country of Meditor.

 

1. Not in labor force

 

a. male: 45 million

 

b. female: 35 million

2. Unemployed

 

a. male: 5 million

 

b. female: 5 million

3. Employed

 

a. male: 85 million

 

b. female: 65 million

 

 

____    8.   8. Refer to Labor Stats. What is the adult population in Meditor?

a.

90 million

b.

150 million

c.

160 million

d.

240 million

 

 

____    9.   9. Refer to Labor Stats. What is the adult labor force in Meditor?

a.

90 million

b.

150 million

c.

160 million

d.

240 million

 

 

____  10.   10. Refer to Labor Stats. What is the adult unemployment rate in Meditor?

a.

4.12%

b.

6.25%

c.

11.11%

d.

12.50%

 

 

____  11.   11. The CPI is a measure of the overall cost of

a.

inputs purchased by a typical producer.

b.

goods and services bought by a typical consumer.

c.

goods and services produced in the economy.

d.

stocks on the New York Stock Exchange.

 

 

____  12.   12. The CPI is calculated

a.

monthly by the Department of Commerce.

b.

monthly by the Bureau of Labor Statistics.

c.

quarterly by the Department of Commerce.

d.

quarterly by the Bureau of Labor Statistics.

 

 

____  13.   13. The steps involved in calculating the consumer price index, in order, are as follows:

a.

Choose a base year, fix the basket, compute the inflation rate, compute the basket's cost, and compute the index.

b.

Choose a base year, find the prices, fix the basket, compute the basket's cost, and compute the index.

c.

Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index.

d.

Fix the basket, find the prices, compute the inflation rate, choose a base year and compute the index.

 

 

 

Table 24-2

Year

Price of pork

Price of corn

2005

$20

 $12

2006

$25

 $18

 

 

____  14.   14. Refer to Table 24-2. Suppose the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the consumer price index for 2006 if the base year is 2005?

a.

73.47

b.

109.22

c.

136.11

d.

150.00

 

 

____  15.   15. Refer to Table 24-2. Suppose the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the inflation rate for 2006 if the base year is 2005?

a.

21.33 percent

b.

25.00 percent

c.

28.89 percent

d.

36.11 percent

 

 

____  16.   16. The price index in 2006 is 120, and in 2007 it is 127.2. What is the inflation rate?

a.

5.4 percent

b.

6.0 percent

c.

7.2 percent

d.

The inflation rate is impossible to determine without knowing the base year.

 

 

____  17.   17. One of the widely-acknowledged problems with the consumer price index (CPI) as a measure of the cost of living is that the CPI

a.

fails to account for consumer spending on housing.

b.

accounts only for consumer spending on food, clothing, and energy.

c.

fails to account for the fact that consumers spend larger percentages of their incomes on some goods and smaller percentages of their incomes on other goods.

d.

fails to account for the improvement of quality.

 

 

____  18.   18. To which of the problems in the construction of the CPI is the invention of pocket-sized computers most relevant?

a.

substitution bias

b.

introduction of new goods

c.

unmeasured quality change

d.

income bias

 

 

____  19.   19. Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price of ginger ale has increased 15 percent, so she decides to buy some peppermint tea instead. To which problem in the construction of the CPI is this situation most relevant?

a.

substitution bias

b.

introduction of new goods

c.

unmeasured quality change

d.

income effect

 

 

____  20.   20. Which of the following is what Phillip’s curve describes as the relationship between inflation and unemployment?

a.

In the short run, falling inflation is associated with falling unemployment.

b.

In the short run, falling inflation is associated with rising unemployment.

c.

In the long run, falling inflation is associated with falling unemployment.

d.

In the long run, falling inflation is associated with rising unemployment.