Question 1

The real interest rate can be negative.

Accepted Answer

A) True 
 B)False

Question 2

Inflation rates differ across regions mostly because of differences in housing prices.

Accepted Answer

A) True 
 B)False

Question 3

If the CPI in 2003 was 150 and the CPI in 2004 was 160,the inflation rate over the year was 10 percent.

Accepted Answer

A) True 
 B)False

Question 4

Since World War II,the U.S.economy has experienced

Accepted Answer

A)  a decrease in the civilian labor force
B)  a decrease in the number of unemployed persons
C)  a decrease in the number of employed persons
D)  an increase in the labor force participation rate of women
E)  a declining unemployment rate as a general trendF) C) and E)
G) A) and E)

Question 5

In addition to Brazil,another country recently suffering from hyperinflation is

Accepted Answer

A)  Zimbabwe
B)  Japan
C)  Ireland
D)  South Africa
E)  CanadaF) A) and C)
G) A) and E)

Question 6

If nominal wages increase 7 percent while the price level rises by 5 percent,real wages rise.

Accepted Answer

A) True 
 B)False

Question 7

Which period in U.S.economic history was not characterized by inflation?

Accepted Answer

A)  1917-1920
B)  1929-1933
C)  1947
D)  1978-1980
E)  1980-1989F) A) and B)
G) A) and C)

Question 8

During inflationary times,which of the following is unlikely to happen?

Accepted Answer

A)  People change their expectations about the inflation rate.
B)  Workers try to get increases in nominal wages.
C)  People are willing to lend money for longer periods.
D)  Relative price changes become harder to recognize.
E)  People buy physical assets as a hedge against rising prices.F) B) and D)
G) B) and E)

Question 9

Since World War II,the average duration of unemployment in the U.S.

Accepted Answer

A)  increased
B)  decreased
C)  has shown no change
D)  decreased until 1972,then increased down to the present
E)  decreased until 1984,then increased down to the presentF) A) and E)
G) None of the above

Question 10

Which of the following is true about inflation?

Accepted Answer

A)  Inflation promotes social harmony by uniting people against the government.
B)  Inflation is more damaging if it is unanticipated.
C)  Accurate anticipation of inflation is possible for everyone who is well informed about economic events.
D)  Those who lend money at a rate above the rate of inflation suffer economic losses.
E)  If people accurately anticipate inflation,their actions will prevent it.F) A) and B)
G) A) and E)

Question 11

The best example of a frictionally unemployed worker is one who

Accepted Answer

A)  reduces productivity by causing frictions in a business
B)  is laid off during a recessionary period in the economy
C)  is in the process of voluntarily switching jobs
D)  is discouraged and not actively seeking work
E)  cannot find a job that matches with his skillsF) C) and D)
G) B) and D)

Question 12

Unemployment arising from mismatch of skills is called

Accepted Answer

A)  frictional unemployment
B)  structural unemployment
C)  seasonal unemployment
D)  cyclical unemployment
E)  underemploymentF) B) and E)
G) All of the above

Question 13

The unemployment rate is the

Accepted Answer

A)  percentage of people in the economy who do not hold jobs
B)  percentage of the labor force that does not have a job
C)  number of people in the economy who have given up looking for employment
D)  number of people in the labor force without jobs
E)  ratio of unemployed to employed high school graduates in the economyF) C) and E)
G) A) and C)

Question 14

Since the end of World War II,the U.S.price level has

Accepted Answer

A)  increased eightfold
B)  increased by an average of 10 percent each year
C)  increased and decreased with equal regularity,leaving the price level almost constant
D)  increased by 50 percent
E)  doubledF) A) and B)
G) A) and E)

Question 15

If the nominal interest rate is 6 percent and the inflation rate is 4 percent,

Accepted Answer

A)  the real interest rate is 10 percent
B)  the real interest rate is 2 percent
C)  the real interest rate is -2 percent
D)  the real interest rate is -10 percent
E)  there is insufficient information to determine the real rate of interestF) A) and B)
G) A) and C)

Question 16

If the expected inflation rate is high,the nominal interest rate will be low.

Accepted Answer

A) True 
 B)False

Question 17

Deflation refers to

Accepted Answer

A)  decreasing relative prices
B)  a decreasing price level
C)  a slowing down of the rate of inflation
D)  a slowing down of the rate of relative price decreases
E)  a federal government policy of running budget surplusesF) A) and E)
G) B) and E)

Question 18

During which of the following decades was the U.S.inflation rate highest?

Accepted Answer

A)  1920s
B)  1930s
C)  1950s
D)  1970s
E)  1980sF) All of the above
G) D) and E)

Question 19

Since the end of World War II,the U.S.unemployment rate

Accepted Answer

A)  has displayed a downward trend
B)  has displayed an upward trend
C)  has remained almost constant from year to year
D)  was generally higher during the 1970s than during the 1990s
E)  has not displayed any clear patternF) A) and E)
G) A) and D)

Question 20

Suppose you received a 5 percent increase in your nominal wage.Over the year,inflation ran about 2 percent.Which of the following is true?

Accepted Answer

A)  Your real wage fell.
B)  Your nominal wage fell.
C)  Both your nominal and real wages decreased.
D)  Although your nominal wage fell,your real wage increased.
E)  Both your nominal and real wages increased.F) B) and E)
G) B) and D)

Exam 7: Unemployment and Inflation

During which of the following decades was the U.S.inflation rate highest?

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During inflationary times,which of the following is unlikely to happen?

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If the nominal interest rate is 6 percent and the inflation rate is 4 percent,

Correct AnswerverifiedShow Answer

If nominal wages increase 7 percent while the price level rises by 5 percent,real wages rise.

Correct AnswerverifiedShow Answer

Which of the following is true about inflation?

Correct AnswerverifiedShow Answer

Deflation refers to

Correct AnswerverifiedShow Answer

The unemployment rate is the

Correct AnswerverifiedShow Answer

Which period in U.S.economic history was not characterized by inflation?

Correct AnswerverifiedShow Answer

If the expected inflation rate is high,the nominal interest rate will be low.

Correct AnswerverifiedShow Answer

The real interest rate can be negative.

Correct AnswerverifiedShow Answer

Unemployment arising from mismatch of skills is called

Correct AnswerverifiedShow Answer

If the CPI in 2003 was 150 and the CPI in 2004 was 160,the inflation rate over the year was 10 percent.

Correct AnswerverifiedShow Answer

Since World War II,the U.S.economy has experienced

Correct AnswerverifiedShow Answer

Inflation rates differ across regions mostly because of differences in housing prices.

Correct AnswerverifiedShow Answer

Suppose you received a 5 percent increase in your nominal wage.Over the year,inflation ran about 2 percent.Which of the following is true?

Correct AnswerverifiedShow Answer

In addition to Brazil,another country recently suffering from hyperinflation is

Correct AnswerverifiedShow Answer

Since the end of World War II,the U.S.price level has

Correct AnswerverifiedShow Answer

Since the end of World War II,the U.S.unemployment rate

Correct AnswerverifiedShow Answer

Since World War II,the average duration of unemployment in the U.S.

Correct AnswerverifiedShow Answer

The best example of a frictionally unemployed worker is one who

Correct AnswerverifiedShow Answer

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