Question 1

Unanticipated inflation:

Accepted Answer

A)  reduces the real burden of the debt for borrowers
B)  hurts borrowers and helps lenders
C)  automatically hurts people whose sole source of income is from wages
D)  helps both borrowers and lenders
E)  hurts both borrowers and lendersF) B) and E)
G) B) and D)

Question 2

Kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree.With degree in hand,she is now searching for a position in management.At present,Kimberly is:

Accepted Answer

A)  cyclically unemployed
B)  structurally unemployed
C)  frictionally unemployed
D)  seasonally unemployed
E)  not a member of the labour forceF) A) and B)
G) D) and E)

Question 3

According to David Foot's demographic analysis,the second half of the Echo generation:

Accepted Answer

A)  will have a relatively easy time finding jobs once they reach working age
B)  will face many of the same problems once experienced by Generation X
C)  is a particularly small demographic group
D)  will have the advantage of having parents born during the Baby Bust
E)  will face many of the same advantages as those born during the early part of the Baby BoomF) B) and E)
G) A) and E)

Question 4

Official unemployment statistics:

Accepted Answer

A)  may understate unemployment, because individuals receiving unemployment compensation are counted as employed
B)  may understate unemployment, because discouraged workers are not counted as unemployed
C)  include cyclical and structural unemployment, but not frictional unemployment
D)  may overstate unemployment, because workers who are involuntarily working part-time are counted as being employed
E)  include cyclical and frictional unemployment, but not structural unemploymentF) C) and E)
G) B) and E)

Question 5

If the consumer price index rises from 300 to 333 in a particular year,the rate of inflation in that year is:

Accepted Answer

A)  11 percent
B)  33 percent
C)  91 percent
D)  10 percent
E)  99 percentF) D) and E)
G) B) and D) A

Question 6

Part-time workers are counted as:

Accepted Answer

A)  unemployed and, therefore, the official unemployment rate can overstate the level of unemployment
B)  unemployed and, therefore, the official unemployment rate can understate the level of unemployment
C)  fully employed and, therefore, the official unemployment rate can overstate the level of unemployment
D)  fully employed and, therefore, the official unemployment rate can understate the level of unemployment
E)  only partly employed, and therefore the official unemployment rate accurately reflects the underlying unemployment rateF) A) and E)
G) B) and E)

Question 7

If the consumer price index falls from 120 to 116 in a particular year,the economy has experienced:

Accepted Answer

A)  inflation of 4 percent
B)  inflation of 3.33 percent
C)  deflation of 3.33 percent
D)  deflation of 4 percent
E)  low unemploymentF) B) and E)
G) C) and E) C

Question 8

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion,the value of the GDP deflator for that year is:

Accepted Answer

A)  100
B)  200
C)  240
D)  300
E)  333F) B) and C)
G) C) and D)

Question 9

At the economy's natural rate of unemployment:

Accepted Answer

A)  the economy achieves its potential output
B)  there is a relatively low level of cyclical unemployment
C)  only frictional unemployment exists
D)  only seasonal unemployment exists
E)  only structural unemployment existsF) C) and E)
G) None of the above

Question 10

To be officially unemployed,a person must:

Accepted Answer

A)  be in the labour force
B)  be 21 years of age or older
C)  have just lost a job
D)  be waiting to be called back from a layoff
E)  be collecting Employment InsuranceF) A) and D)
G) D) and E)

Question 11

During a period of unanticipated deflation:

Accepted Answer

A)  debtors gain, because they repay their debts with dollars of diminished value
B)  people with partially indexed incomes suffer
C)  income is redistributed away from savers
D)  people on unindexed incomes are hurt
E)  debtors lose, because they repay their debts with dollars of greater valueF) None of the above
G) B) and C)

Question 12

Recently a labour union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true,because the union had been acquiring increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

Accepted Answer

A)  Yes, because when you have an increase in nominal income, your standard of living automatically increases.
B)  No, because real income may fall if price increases are proportionally greater than the increases in nominal income.
C)  No, because real income may fall if price increases are proportionally less than the increases in nominal income.
D)  Yes, because real income may fall if price increases are proportionally less than the increases in nominal income.
E)  Yes, because real income may fall if price increases are proportionally greater than the increases in nominal income.F) None of the above
G) All of the above

Question 13

A lender need not be penalized by inflation if the:

Accepted Answer

A)  long-term rate of inflation is less than the short-term rate of inflation
B)  short-term rate of inflation is less than the long-term rate of inflation
C)  lender correctly anticipates inflation and increases the nominal interest rate accordingly
D)  inflation is unanticipated by both borrower and lender
E)  long-term rate of inflation is the same as the short-term rate of inflationF) All of the above
G) B) and E)

Question 14

Which of the following is least likely to be hurt by unanticipated inflation?

Accepted Answer

A)  a disabled labourer who is living off accumulated savings
B)  an owner of a small business with high debts
C)  a secretary
D)  a retired steelworker with a partially indexed pension
E)  an unskilled worker who makes an unindexed wageF) All of the above
G) None of the above

Question 15

Suppose that a person's nominal income rises by 5 percent and the consumer price index rises from 125 to 130.The person's real income will:

Accepted Answer

A)  fall by about 1 percent
B)  remain constant
C)  rise by about 4 percent
D)  fall by about 4 percent
E)  rise by about 1 percentF) A) and C)
G) B) and D)

Question 16

In a given year,a country's nominal income rose by 8 percent and its price level rose by 5 percent.We can conclude that the country's real income:

Accepted Answer

A)  may have either increased or decreased
B)  rose by 13 percent
C)  rose by 3 percent
D)  fell by 13 percent
E)  fell by 3 percentF) A) and B)
G) None of the above C

Question 17

If nominal GDP rises:

Accepted Answer

A)  real GDP may either rise or fall
B)  the price level has risen
C)  real GDP must fall
D)  real GDP must also rise
E)  the price level has fallenF) D) and E)
G) A) and B)

Question 18

A country's consumer price index was 124.0 at the end of year 1 and 130.7 at the end of year 2.Therefore,the rate of inflation during year 2 was about:

Accepted Answer

A)  6.7 percent
B)  5.4 percent
C)  3.2 percent
D)  13.6 percent
E)  15.4 percentF) None of the above
G) A) and C)

Question 19

Suppose that nominal GDP in 2006 was $100 billion and,in 2012,it was $260 billion.The GDP deflator in 2006 was 100 and,in 2012,it was 180.Between 2006 and 2012,real GDP rose by:

Accepted Answer

A)  160 percent
B)  44 percent
C)  37 percent
D)  12 percent
E)  80 percentF) None of the above
G) C) and D)

Question 20

Unanticipated inflation:

Accepted Answer

A)  arbitrarily "taxes" fixed-income groups
B)  increases the real value of savings
C)  increases the purchasing power of the dollar
D)  benefits lenders at the expense of borrowers
E)  does not affect lenders or borrowersF) B) and C)
G) D) and E)

Exam 9: Inflation and Unemployment

Unanticipated inflation:

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Kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree.With degree in hand,she is now searching for a position in management.At present,Kimberly is:

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According to David Foot's demographic analysis,the second half of the Echo generation:

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Official unemployment statistics:

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If the consumer price index rises from 300 to 333 in a particular year,the rate of inflation in that year is:

Correct AnswerverifiedA

Part-time workers are counted as:

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If the consumer price index falls from 120 to 116 in a particular year,the economy has experienced:

Correct AnswerverifiedC

If real GDP in a particular year is $80 billion and nominal GDP is $240 billion,the value of the GDP deflator for that year is:

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At the economy's natural rate of unemployment:

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To be officially unemployed,a person must:

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During a period of unanticipated deflation:

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Recently a labour union argued that the standard of living of its members was falling.A critic of the union argued that this could not possibly be true,because the union had been acquiring increases in the nominal incomes of its members through collective bargaining.Is the critic correct?

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A lender need not be penalized by inflation if the:

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Which of the following is least likely to be hurt by unanticipated inflation?

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Suppose that a person's nominal income rises by 5 percent and the consumer price index rises from 125 to 130.The person's real income will:

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In a given year,a country's nominal income rose by 8 percent and its price level rose by 5 percent.We can conclude that the country's real income:

Correct AnswerverifiedC

If nominal GDP rises:

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A country's consumer price index was 124.0 at the end of year 1 and 130.7 at the end of year 2.Therefore,the rate of inflation during year 2 was about:

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Suppose that nominal GDP in 2006 was $100 billion and,in 2012,it was $260 billion.The GDP deflator in 2006 was 100 and,in 2012,it was 180.Between 2006 and 2012,real GDP rose by:

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Unanticipated inflation:

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A

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C

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C

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