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Macro Chapter 8 Practice questions

Frictional unemployment results from
scarce information about job opportunities and the time it takes to acquire that information.
The definition of the unemployment rate is
the percentage of persons in the civilian labor force who are not employed.
Inflation is best described as
a sustained increase in the general level of prices as indicated by a price index.
The natural rate of unemployment equals
the sum of frictional and structural unemployment.
The labor force participation rate is
the number of persons 16 years of age and older who are either employed or actively seeking work divided by the total noninstitutional population 16 years of age and older.
Structural unemployment means that
worker qualifications do not match available jobs.
Actual GDP
is less than potential GDP during recessions.
During periods of high and variable inflation, which of the following is unlikely to occur?
Individuals will find it difficult to know whether a price change is due to the general inflation or due to shifts in supply or demand in a given market.
In a properly operating, dynamic economy,
we would expect to have some unemployment due to normal structural and frictional factors.
The period of declining growth in real GDP between the peak of the business cycle and the trough is called the
contractionary phase.
Which of the following will most likely occur during the expansionary phase of a business cycle?
Real GDP rises and unemployment falls.
In the early 1990s, the U.S. government substantially reduced defense expenditures. The resulting unemployment of defense-related workers, who possessed skills no longer needed by the economy, is an example of
structural unemployment.
Which of the following would be officially classified as unemployed?
a school administrator who has been working as a substitute teacher one day per week while looking for a full-time job in administration
(I) Changes in the age composition of the labor force will affect the natural rate of unemployment (for example, an increase in the relative number of youthful workers).
(II) Institutional changes such as an increase in the minimum wage may increase cyclical unemployment but will not affect the natural rate of unemployment.
I is true; II is false.
During a boom, the output of the economy will exceed its long-run potential output.
The natural rate of unemployment
is associated with the economy’s maximum sustainable output rate.
During this century, the growth rate of real GDP in the United States has averaged approximately
3 percent.
Economists use the term “business cycle” to refer to
fluctuations in the level of real output and employment.
The labor force participation rate of women in the United States has been
increasing for several decades and this has strongly affected GDP.
Suppose there was a country with an adult (age 16 and over) population of 1,000, of which 100 were unemployed and 700 were employed. Which of the following is true?
The unemployment rate is 12.5 percent.
The type of unemployment caused by changes in the business cycle is
cyclical unemployment.
Frictional unemployment is the result of
imperfect information and temporary periods of unemployment while workers are changing jobs.
Suppose an economy is operating at its maximum sustainable output rate. Neither recession nor economic boom are present. Which of the following would be true?
The economy would be considered at full employment.
Which of the following individuals would be considered unemployed by the official government definition?
Ralph, an auto worker who was laid off at a General Motors plant and is looking for another job
Suppose that the consumer price index at year-end 2004 was 140 and by year-end 2005 had risen to 150. What was the inflation rate during 2005?
7.1 percent
Decision makers are generally able to anticipate slow steady rates of inflation with a fairly high degree of accuracy.

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