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| 1 | |
The sacrifice ratio is defined as |
| | A) | the inflation rate divided by the unemployment rate |
| | B) | the percentage decrease in unemployment for each one-percent increase in the inflation rate |
| | C) | the percentage increase in the unemployment rate for every one-percent reduction in GDP |
| | D) | the percentage decrease in GDP for every a one-percent decrease in the inflation rate |
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| 2 | |
The percentage of total output that is lost for each one percent reduction in the rate of inflation is known as the |
| | A) | misery index |
| | B) | the sacrifice ratio |
| | C) | the replacement ratio |
| | D) | the menu cost of inflation |
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| 3 | |
The fact that an increase in the unemployment rate by one percent will lead to a roughly two-percent loss in output is referred to as |
| | A) | the sacrifice ratio |
| | B) | the replacement ratio |
| | C) | Okun's law |
| | D) | the misery index |
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| 4 | |
Which of these people is officially counted as unemployed? |
| | A) | a secretary who took six months off on a maternity leave |
| | B) | an aspiring actress who works part-time as a waitress but would prefer to act full-time |
| | C) | a maid who got fired from her old job three months ago but will start a new job in a week |
| | D) | a student who joined the baby sitters' pool but averages only about four customers a week |
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| 5 | |
By looking at the duration of unemployment in the U.S. in 2003, we can see that |
| | A) | the mean duration of unemployment was less than 20 weeks |
| | B) | about 62 percent of all unemployed remained unemployed less than 15 weeks |
| | C) | about 22 percent of the unemployed were unemployed for more than half a year |
| | D) | all of the above |
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| 6 | |
Which of the following is TRUE? |
| | A) | there are only small variations in the unemployment rates across groups defined by age or race |
| | B) | flows into and out of the unemployment pool are fairly small relative to the number of unemployed |
| | C) | the average duration of unemployment tends to be fairly high and is generally more than half a year long |
| | D) | a significant part of the turnover in the labor market is cyclical in nature |
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| 7 | |
The Bureau of Labor Statistics defines a person as employed if, during a reference week, that person |
| | A) | worked 15 or more hours as an unpaid worker in a business operated by a family member |
| | B) | was out of work but was actively looking for work in the previous four weeks |
| | C) | was waiting to be recalled to a job from which she was laid off a short time ago |
| | D) | none of the above |
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| 8 | |
Assume adult males have a 50% share of the work force and their unemployment rate is 5.0%; adult females' share is 40% and their unemployment rate is 6.0%; teenagers' share of the work force is 10% and their unemployment rate is 10.0%. What is the overall unemployment rate? |
| | A) | 5.2% |
| | B) | 5.6% |
| | C) | 5.9% |
| | D) | 6.1% |
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| 9 | |
Assume females constitute a 45% of the adult work force and their unemployment rate is 4.2%; males constitute 55% of the adult work force and their unemployment rate is 4.6%; teenagers’ share of the work force is 10% and their unemployment rate is 12.0%. What is the overall unemployment rate? |
| | A) | 4.8% |
| | B) | 5.2% |
| | C) | 5.8% |
| | D) | 6.0% |
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| 10 | |
Assume the share of adult men in the labor force is 48% and their unemployment rate is 4.5%; the share of adult females in the labor force is 45% and their unemployment rate is 4.4%. If the overall unemployment rate is 5.1%, what is the unemployment rate of teenagers, who comprise 7% of the labor force? |
| | A) | 13.7% |
| | B) | 12.4% |
| | C) | 8.4% |
| | D) | 7.8% |
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| 11 | |
The natural rate of unemployment can be reduced by |
| | A) | improving the organization of the labor market |
| | B) | reducing the availability of unemployment benefits |
| | C) | increasing the skills and training of the long-term unemployed |
| | D) | all of the above |
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| 12 | |
Which of the following statements is FALSE? |
| | A) | the natural rate of unemployment varies over time |
| | B) | the average duration of unemployment has not changed much over time |
| | C) | improving job mobility of workers and making information about new jobs more available will help to reduce the natural unemployment rate |
| | D) | reducing unemployment benefits will help to reduce the duration of unemployment |
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| 13 | |
The term unemployment hysteresis refers to the fact that |
| | A) | the natural rate of unemployment cannot be reduced through conventional demand management policies |
| | B) | laid-off workers reduce their consumption, causing unemployment to increase in other sectors |
| | C) | firms are more likely to lay off workers if they know that these workers can get unemployment benefits |
| | D) | long periods of high unemployment may actually increase the natural rate of unemployment |
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| 14 | |
Which of the following is NOT a potential benefit of reducing the unemployment rare? |
| | A) | lower unemployment generally means a higher level of real GDP |
| | B) | lower unemployment generally implies fewer social problems |
| | C) | lower unemployment generally reduces unwanted leisure |
| | D) | lower unemployment generally means increased tax revenue for the government |
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| 15 | |
If inflation were always perfectly anticipated, then |
| | A) | menu costs would not arise |
| | B) | currency holders would still be stuck with a negative rate of return |
| | C) | unemployment would always be at its natural rate |
| | D) | all of the above |
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| 16 | |
If inflation this year is lower than expected, then |
| | A) | lenders will gain at the expense of borrowers |
| | B) | borrowers will gain at the expense of lenders |
| | C) | the government will gain if it does not have an indexed tax system |
| | D) | wealth will be transferred from the poor to the rich |
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| 17 | |
Which of the following statements is FALSE? |
| | A) | wage indexation makes it harder for the economy to adjust to the full-employment level of output after a supply shock |
| | B) | there are no costs to perfectly anticipated inflation |
| | C) | there are shoe leather and menu costs even if inflation is anticipated |
| | D) | wage indexation is more prevalent in countries with high inflation than countries with low inflation |
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| 18 | |
If wages were fully indexed, then |
| | A) | nominal wages would be periodically increased proportionally to the increase in prices over a given time period |
| | B) | there would never be an increase in inflation after a supply shock |
| | C) | the government would gain since inflation taxes away what workers may have gained from nominal wages increases |
| | D) | the economy would more easily adjust to full employment after a supply shock |
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| 19 | |
The evidence in support of the political business cycle hypothesis, which refers to the interaction between the economic decision made by incumbents and the political fall-out from these decisions, is mixed at best since |
| | A) | mid-term elections limit the incumbent’s ability to implement politically motivated policy changes |
| | B) | external disturbances often overshadow the election cycle |
| | C) | the independence of the Fed makes it difficult to manipulate the economy just in time for an upcoming election |
| | D) | all of the above |
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| 20 | |
The misery index |
| | A) | combines the sacrifice ratio with Okun's law |
| | B) | is strongly related to voting behavior and thus supports the political business cycle theory |
| | C) | is constructed by adding the inflation rate and the unemployment rate |
| | D) | can be calculated by adding the sacrifice ratio and the replacement rate |
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