Quiz 1 Chapter 7-9

1. Which of the following is not included in the labor​ force?

A. People who do not have​ jobs, and do not want one.

B. People who are employed.

C. People who do not have​ jobs, but who are actively searching for one.

D. None of the above.

2. Related to​ Application: More Disability, Less Unemployment?

Disability and​ Low-Skilled Workers. Disability payments replace a higher fraction of the wages of​ low-wage workers than of​ high-wage workers. ​ Overall, average disability payments rise with the average wage. Suppose wages of​ low-skilled workers fell sharply relative to​ high-wage workers. This creates

A. a greater incentive for​ low-wage workers to enter​ disability, because disability payments replace a higher fraction of the wages of a​ low-wage worker.

B. less of an incentive for​ high-wage workers to enter​ disability, because average disability payments rise with the average wage.

C. a greater incentive for​ high-wage workers to enter​ disability, because disability payments replace a smaller fraction of the wages of a​ high-wage worker.

D. less of an incentive for​ low-wage workers to enter​ disability, because wages of​ low-skilled, low-wage workers fell sharply relative to​ high-wage workers.

3. Housework and Labor Statistics. Suppose the government decided that homemakers should be counted as employed because they perform important services. How do you think this change would affect our measure of the labor​ force, the labor force participation​ rate, and the unemployment​ rate?

A.The labor force and the labor force participation rate would increase and the unemployment rate would decrease.

B.The labor force and the labor force participation rate would increase but the unemployment rate would remain unchanged.

C.The labor force and the unemployment rate would remain unchanged and the labor force participation rate would increase.

D.The labor force and the labor force participation rate would remain unchanged but the unemployment rate would decrease.

4. When the economy is at full​ employment, there is only cyclical unemployment.

True or False

5. What is likely to occur in the economy if the unemployment rate drops below the natural rate of​ unemployment?

A.increased cyclical unemployment

B.higher inflation

C.lower inflation

D.higher structural unemployment

6. The effects of unemployment today may carry over into the future because

A. a person must be actively seeking work to be counted as unemployed.

B. those that experience prolonged unemployment lose job skills that are difficult to recover.

C. discouraged workers are not measured in the unemployment rate.

D. none of the above.

7. The single largest component of the basket of goods that comprises the CPI is the category for

A. medical services.

B. food and beverages.

C. rent.

D. transportation.

8. High Prices and Inflation. Critically evaluate the following​ statement: “Tokyo is an expensive place to live. They must have a high inflation rate in​ Japan.”

A. False. The inflation rate tends to overstate the cost of living.

B. False. Tokyo and Japan do not face the same prices.

C. False. Inflation measures price​ changes, not price levels.

D. True. If Tokyo is​ expensive, then​ Japan’s inflation rate will be high.

9. Price Indexes for the Elderly. The inflation rate for the elderly differ from the​ non-elderly because the elderly

A. have less income.

B. began work at an earlier age than the current generation.

C. cannot collect Social Security until they are age 62.

D. purchase different goods and services.

If the elderly faced a different inflation rate than the rest of the​ population, the Social Security payments would

A. equal the CPI.

B. be eliminated.

C. equal the inflation rate.

D. change.

10. Which of the following are side effects of unanticipated​ inflation?

A.Individuals will spend more of their time trying to profit from inflation rather than at productive jobs.

B.Banks will stop providing fixed mortgages and only offer adjustable rate mortgages.

C.The purchasing power of your wages will be less than anticipated.

D.All of the above.

___ will lose because inflation will erode the amount of money they are being repaid for the loans.

A. Debtors B. Creditors

Chapter 8

1. Arthur Okun distinguished between _A_ prices, which changed​ rapidly, and _B_ ​prices, which are slow to change.

A. a. Custom b. Auction c. Wholesale d. Retail b. a. custom b. wholesale c. auction d. retail

2. Related to​ Application: Measuring Price Stickiness in Consumer Markets

The Internet and Price Flexibility. The Internet has enabled consumers to search for the lowest prices of various goods and has allowed prices of many items to be rather flexible. Which of the following goods or services may not become more flexible in price because of the​ Internet?

A.Legal services.

B.Stereo components.

C.Airline tickets.

D.Music CDs.

3. Which of the following products is most likely to have a​ “sticky” price?

A.one gallon of gasoline

B.an ounce of gold

C.wages of a Hollywood star

D.heavy machinery

4. Which of the following is not a component of aggregate​ demand?

A.Consumption.

B.Depreciation.

C.Net exports

D.Federal government expenditures.

5. Calculating the MPS and MPC. In one​ year, a​ consumer’s income increases by ​$400 and her consumption increases by ​$160.Her marginal propensity to consume is equal to _A_ ​. (Enter your responses rounded to two decimal​ places.)Her marginal propensity to save is equal to _B_ .(Enter your responses rounded to two decimal​ places.)

6. The aggregate demand curve shows the relationship between

A.price and elasticity.

B.interest rates and investment.

C.the level of prices and the quantity of real GDP demanded.

D.price and quantity.

7. In the long​ run, if aggregate demand decreases​,

A.both the price level and output or real GDP will remain unchanged.

B.the price level will decrease and output or real GDP will decrease.

C.the price level will remain unchanged and output or real GDP will decrease.

D.the price level will decrease and output or real GDP will remain unchanged.

8. China Comes Roaring Back. In the 2008​ recession, China was one of the first economies to recover and its GDP growth quickly returned to its​ pre-recession levels.

This caused aggregate demand in the rest of the world to

A.increase because any increase in demand from the foreign sector will also increase aggregate demand.

B.decrease because the Chinese produced more of their own goods.

C.increase because the Chinese produced more of their own goods.

D.decrease because rapid growth in China will decrease aggregate demand in the rest of the world.

9. The​ short-run aggregate supply curve shows the​ short-run relationship between the

A.price level and quantity supplied in one market.

B.price level and total demand in the entire economy.

C.consumption level and the price level.

D.price level and the willingness of firms to supply output to the economy.

10. Shifts in Aggregate Demand and​ Cost-Push Inflation. When wages rise and the​ short-run aggregate supply curve shifts​ up, the result is​ “cost-push” inflation. If the economy was initially at​ full-employment and the aggregate demand curve was shifted to the​ right, the level of unemployment will be very _A_ making it _B_ for firms to recruit and retain workers and purchase needed raw materials and other inputs for production. There will be a tendency for both wages and prices to _C _ over time. This will shift the​ short-run aggregate supply curve _D_ until the economy reaches the​ long-run equilibrium.

A a. low b. unpredictable c.high

B. a.easy b.difficult c.impossible

C. a.decrease b.increase c. be constant

D.a.upward b.to the right c. downward

Chapter 9

1. A contractionary fiscal policy shifts the aggregate demand curve to the _A_ . _B_ prices, and _C_ real GDP.

A. a.right b. Left B. a.lowers b.raises C. a.increases b.decreases

2. A Chinese Experiment. In​ 2000, the Chinese government mandated three​ one-week holidays throughout the year to stimulate consumer spending. The idea was that these extended vacations would induce the Chinese to spend more of their earnings while on vacation. Although consumption spending rose during the vacation​ period, the data show that consumption fell before and after the vacation by approximately the same amount as spending rose during the vacation. As a​ result, there was _A_ change in aggregate demand and the overall policy of stimulating the economy through mandated vacations was _B_ effective.

A. a.No b.a significally negative c.a significally positive B. a.not b.very

3. Looking Backwards. Some critics of stabilization policy say that policymakers are always looking backwards—through a rear-view mirror at past data—and thus cannot conduct stabilization policy.

Which of the following is a defense for​ policymakers?

A.​Recently, the recognition of lags in data collection has eliminated the use of stabilization policies.

B. Recently, analysts have found that future trends usually follow past data.

C. Economic forecasts using past data are better than forecasts using current data.

D. Sometimes economic conditions require that stabilization policies be enacted by relying on the best available data

4. Fiscal year 2012 began on _A_

A.a. April 15,2011 b.June 1,2012 c.January1,2012 d.October 1,2011

5. The States and Balanced Budgets. Unlike the U.S. federal​ government, virtually all states have requirements that they either plan for or maintain a balanced budget. If the national economy experiences a​ recession,

A. state budgets do not get affected because all state budgets are always automatically balanced.

B. state budgets go into deficits since states spend less to offset the increase in federal spending.

C. state budgets do not get affected because the federal budget and state budgets are completely separate.

D. state budgets go into deficits as tax revenues decline.

6. Automatic Stabilizers and Fluctuations in Output. Because of automatic​ stabilizers, the states that have a more generous unemployment insurance program experience _A_ fluctuations in output.

A.Larger B.smaller C.no

7. Economist Arthur Laffer argued what theory on tax​ rates?

A.High tax rates make people want to work harder.

B.Excessivly high tax rates lead to lower government revenue.

C.High tax rates are a fair way to redistribute wealth.

D.High tax rates should be used to punish the rich.

8. Who among the following was the first president to consciously use fiscal policy to stabilize the​ economy?

A.Lyndon Johnson.

B.John F. Kennedy.

C.Herbert Hoover.

D.Franklin D. Roosevelt.

9. The Rise and Fall of Fiscal Surpluses. Which of the following factors led the United States from federal surpluses at the end of the 1990s to deficits in the first decade of​ 2000?

A.Tax hikes combined with spending cuts.

B.Tax hikes combined with increased spending.

C.Tax cuts combined with increased spending.

D.Tax cuts combined with spending cuts.

10. What was the effect on the economy from the Kennedy and Johnson tax​ cuts?

A.Real GDP and consumption declined each year between 1963 and 1966.

B.Real GDP and consumption were unchanged entirely.

C.Real GDP and consumption grew at rates of​ 4% each year between 1963 and 1966.

D.Real GDP and consumption were unchanged from what they would have been