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Exam 20: Unemployment and Inflation

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Question 141

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Suppose that the labor movement has a revival in the United States and the majority of workers join labor unions.As a result we would expect

A) the labor force participation rate to fall.
B) the unemployment rate to fall.
C) the unemployment rate to rise.
D) no change in the unemployment rate or labor force participation rate.

E) B) and C)
F) B) and D)

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Question 142

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If cyclical unemployment is eliminated in the economy,then

A) the economy is considered to be at full employment.
B) the unemployment rate is below the natural rate of unemployment.
C) the unemployment rate is above the natural rate of unemployment.
D) the economy is at less than full employment.

E) A) and C)
F) All of the above

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Question 143

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Which of the following would increase the unemployment rate?

Table 20-18 $\begin{array} { | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Nominal Average Hourly } \\\text { Earnings }\end{array} & \begin{array} { c } \text { CPI } \\( \mathbf { 1 9 8 2 - 1 9 8 4 } = \mathbf { 1 0 0 } ) \end{array} \\\hline 2014 & \$ 10 & 100 \\\hline 2015 & 10 & 105 \\\hline 2016 & 12 & 117 \\\hline\end{array}$ -Refer to Table 20-18.Looking at the table above,what is the rate of growth of real average hourly earnings from 2015 to 2016?

The household survey asks adults about their employment status and is used to compile the monthly unemployment rate.

If inflationary expectations are increasing,we would expect that the nominal interest rate would also be increasing,holding all else constant.

What are menu costs?

Fill in the missing values in the table of data collected in the household survey for December,1996.The working-age population,employment,unemployment,and labor force are measured in thousands.Show your work. $\begin{array} { | l | c | } \hline \text { Working-age population } & \\\hline \text { Employment } & \\\hline \text { Unemployment } & \\\hline \text { Unemployment rate } & 5.4 \% \\\hline \text { Labor force } & 135,113 \\\hline \text { Labor force participation rate } & 67.0 \% \\\hline\end{array}$

An advantage of the household survey over the establishment survey of the labor market is that the household survey

Table 20-14 $\begin{array} { | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Nominal Average } \\\text { Hourly Earnings }\end{array} & \begin{array} { c } \text { CPI (1982-1984= } \\\mathbf { 1 0 0 } ) \end{array} \\\hline 1965 & \$ 2.65 & 32 \\\hline 2010 & 22.59 & 219 \\\hline\end{array}$ The table above reports the nominal average hourly earnings in private industry and the consumer price index for 1965 and 2010. -Refer to Table 20-14.The real average hourly earnings for 1965 in 2010 dollars equal

Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about

According to the text,economists consider full employment to occur when

In the United States,the typical person who has lost his or her job finds another one in a few months except during severe recessions.

The Bureau of Labor Statistics has taken several steps to reduce the bias in the consumer price index.Which of the following is not one of the steps taken to reduce the bias?

Describe how a lender can lose during inflation if the inflation is unanticipated and the loan is a fixed-interest-rate loan.How would a variable-interest-rate loan (one that adjusts over the contract period)eliminate these loses?

The natural rate of unemployment is made up of

You agree to lend $1,000 for one year at a nominal interest rate of 10%.You anticipate that inflation will be 4% over that year.If inflation is instead 3% over that year,which of the following is true?

Table 20-12 $\begin{array} { | l | c | c | c | c | } \hline \text { Product } & \text { Quantity } & \begin{array} { c } \text { Base Year } \\\text { Price (2001) }\end{array} & \text { Price (2015) } & \text { Price (2016) } \\\hline \text { Burritos } & 10 & \$ 1.00 & \$ 1.50 & \$ 1.75 \\\hline \text { Flashlights } & 15 & 5.00 & 7.00 & 6.75 \\\hline \text { Golf balls } & 8 & 2.00 & 3.00 & 3.50 \\\hline\end{array}$ -Refer to Table 20-12.Consider a simple economy that produces only three products: burritos,flashlights,and golf balls.Use the information in the table to calculate the inflation rate for 2016,as measured by the consumer price index.

In recent years,economists have come to rely more on the establishment survey rather than the household survey to analyze current labor market statistics.

If the number employed is 190 million,the number unemployed is 10 million,and the working-age population is 250 million,then the labor force participation rate is