Chapter 06 Practice Test

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Written: Oct 27, 2013 8:11 PM - Oct 27, 2013 8:13 PM

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Chapter 06 Practice Test Question 1

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Given the data in Table 6.1, the unemployment rate of Metropolis is approximately

6 percent. 9 percent. 12 percent. 22 percent.

Social security payments automatically increase when the CPI goes up because of the

Question 2

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age of the recipient. years receiving social security.

cost-of-living adjustments. individual being married or unmarried. Question 3 0 / 5 points

As compared to the estimates of the natural rate of unemployment for the United States, those for Europe are

the same. higher. lower. higher and more variable. Question 4 0 / 5 points
Unemployment that naturally occurs during the normal workings of an economy as people change jobs and move across the country is called

natural unemployment. frictional unemployment. structural unemployment. cyclical unemployment.

To operate efficiently, an economy generally "needs" ________ unemployment.

Question 5

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cyclical frictional structural seasonal Question 6 0 / 5 points

If a large number of workers are classified as being out of the labor force when they are really looking for work, this will lead to an official unemployment rate that is

overstated. understated. either overstated or understated. unbiased. Question 7 0 / 5 points

Suppose that a price index in Paraguay was 131 in 2009 and 152 in 2010. The inflation rate between those two years was

10.5 percent.

11.6 percent. 16 percent. 21 percent. Question 8 0 / 5 points

People who want to work but have stopped looking for work because they could not find jobs after actively searching are called

employed. unemployed. discouraged workers. empowered. Question 9 0 / 5 points

Suppose an economy consists of 500,000 individuals 16 years and older, 260,000 are employed, and 21,000 are unemployed but actively seeking work. In this example the unemployment rate is approximately

4.2 percent. 6.1 percent. 7.5 percent. 8.0 percent. Question 10

The value of a dollar

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is its purchasing power. remains constant over time. is its face value. is set by the government. Question 11 0 / 5 points
Recall the Application about the impact of the federal Disability Insurance program on the unemployment rate to answer the following question(s). According to this Application, the federal Disability Insurance Program has had ________ on the measured unemployment rate.

a very large effect no effect a negligible an inconsequential effect Question 12 0 / 5 points

Suppose that in 2009 the chain-weighted price index for GDP in Estonia is 220 and the chain-weighted price index in Lithuania is 160. In 2010 the price index in Estonia is 242 and the price index in Lithuania is 180. You could conclude that

Estonia is a more expensive place to live than Lithuania. Lithuania is a more expensive place to live than Estonia. Estonia's rate of inflation is higher than Lithuania's. Lithuania's rate of inflation is higher than Estonia's. Question 13
Compared to the natural rate of unemployment, the actual unemployment rate is

5 / 5 points always higher. always lower. always the same.

higher in periods when GDP fails to grow at its normal rate. Question 14 5 / 5 points
Actual unemployment can exceed the natural rate of unemployment due to

structural unemployment. cyclical unemployment. frictional unemployment. All of these Question 15 5 / 5 points
The economy needs some unemployment to operate efficiently, because without it

firms will find it difficult to recruit workers, leading to increased wages and prices. firms will find it difficult to recruit workers, leading to reduced wages and prices. workers will find it difficult to find a job, leading to increased wages and prices. workers will find it difficult to find a job, leading to reduced wages and prices. Question 16
Additional Application Summary of the article: Zimbabwe Abandons Price Controls, Promotes Currency Trading By Brian Latham Bloomberg January 29, 2009

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In response to continued recession and a currency which had become virtually worthless, Zimbabwe's acting finance minister Patrick Chinamasa announced in January 2009 that the government would abandon all price controls and allow Zimbabweans to use any nation's currency to conduct business. In 2009, Zimbabwe entered its eleventh year of recession and its inflation rate, estimated to be 231 million percent in July 2008, was the highest in the world. Due to the inflation, most businesses stopped conducting business using the Zimbabwean dollar, and the government announced that government employees would start being paid with vouchers which could be exchanged for foreign currency. The Application addresses the economic concept of

chain indexes. hyperinflation. cost-of-living adjustments. deflation.

Economists call the physical cost of changing prices:

Question 17

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the cost of doing business. menu costs. inflationary sufferage. increasing profits. Question 18 5 / 5 points
The costs associated with recalculating prices and printing new price lists when there is inflation are known as

shoe leather costs. menu costs. chain-index costs. diminishing costs. Question 19 0 / 5 points
When displaced workers require retraining before entering the labor force again, it is the result of ________ unemployment.

cyclical frictional structural seasonal

Actual unemployment can fall below the natural rate of unemployment due to

Question 20

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structural unemployment. negative cyclical unemployment. frictional unemployment. All of these

Chapter 06 Practice Test

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Raven Robinson (username: A00445445) To Submissions

Attempt 3
Written: Oct 27, 2013 8:17 PM - Oct 27, 2013 8:43 PM

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Chapter 06 Practice Test Question 1

Chain-weighted price indices are constructed such that

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prices in different economies can be directly compared with one another. prices in different years can be directly compared with one another. all years' levels of GDP are directly related to a base year level of GDP. prices of one good can be directly compared with prices of other goods. Question 2 5 / 5 points
What does the Consumer Price Index (CPI) measure?

prices of durable goods prices of non durable goods the cost of living over time

the cost of replacing lost items Question 3 stagnation model fluctuation chain index
Economists define the labor force to include

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An economic ________ refers to either an upturn or a downturn in the economy.

Question 4

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only people who are working full time. people who are working. people who are not working but are actively looking for a job, and people who are working. all individuals of work age, regardless of whether they are working or looking for a job. Question 5 5 / 5 points
The typical relationship between inflation and unemployment is

as unemployment falls, inflation falls. as unemployment falls, inflation increases. as unemployment falls, nothing happens to inflation. unemployment changes do not directly lead to changes in inflation, but inflation changes may cause changes in unemployment. Question 6 5 / 5 points
Cost-of-living adjustments are

automatic wage changes based on the CPI which are included in some union contracts. changes in the basket of goods used in calculating the CPI. averages of neighboring years' base prices used in constructing the CPI. quality measurements included in the calculation of the CPI. Question 7 5 / 5 points
The fraction of the working-age population that is in the labor force is called the

employment rate. unemployment rate. labor force participation rate. nonresponse rate. Question 8 5 / 5 points
________ unemployment occurs due to a mismatch between the jobs that are available and the skills of workers seeking jobs.

Structural Cyclical Frictional Voluntary Question 9 5 / 5 points

When wages or benefits are automatically increased based on the reported inflation rate, it is called the ________ adjustment.

natural flow of money cost-of-living change in exports change in imports Question 10 0 / 5 points
In August 2010, the U.S. labor force consisted of 139,250,000 employed and 14,860,000 unemployed. The U.S. unemployment rate for August 2010 was about

7.7 percent. 9.4 percent. 9.6 percent. 10.9 percent.

The real-nominal principle can be stated as

Question 11

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production generates income. only final goods and services should be counted in GDP. what matters to people is the purchasing power of money or income. only the manufacture of real goods is production. Question 12 0 / 5 points

The principal reason why the chain-weighted index for GDP and the CPI both overstate actual changes in prices is that

it is hard to measure quality changes. the basket of goods purchased by consumers never changes. price data is often inaccurate. All of these Question 13
On what kind of income is our tax system based?

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real nominal adjusted inflationary

Auto workers laid off from Hot-Rod Autoworks as the result of a recession are considered

Question 14

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structurally unemployed. cyclically unemployed. frictionally unemployed. seasonally unemployed. Question 15 5 / 5 points
The Consumer Price Index (CPI) differs from a chain-weighted price index in that the CPI

requires calculation of GDP, while the chain-weighted index does not. measures the costs of a typical fixed basket of goods over time, while the chain-weighted index does not. allows for the goods consumed in an economy to change over time, while the chain-weighted index does not. compares the prices of all goods in one year to the prices of all goods in other years. Question 16 0 / 5 points
Suppose that the chain-weighted index for GDP in Gambia was 275 in 2009 and 350 in 2010. The inflation rate between those two years was

20.2 percent. 27.3 percent.

37.5 percent. 75 percent. Question 17 0 / 5 points

In the United States today, economists estimate that the natural rate of unemployment is between ________ and ________ percent.

3; 5.5 3; 4 5; 6.5 6.5; 7.5 Question 18 5 / 5 points

Using the information in Table 6.2, the Astro Price Index for 2010 is

87. 104. 131. 298. Question 19 0 / 5 points

Hector voluntarily left his job to search for a job in accounting, the field in which he has his bachelor's degree. Hector is considered

structurally unemployed. cyclically unemployed. frictionally unemployed. not to be unemployed. Question 20 5 / 5 points

Using the information in Table 6.2, the Astro Price Index for 2008 is

24. 100. 124. 189.