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ECON Study Guide Quiz

Page 1 Name: __________________________ Date: _____________ 1. Which of the following individuals can be counted as unemployed? A) Barry Kripke, who is serving time for armed robbery B) Mrs. Wolowitz, who has not looked for work for the last two years C) Dr. Koothrappali, who is getting a masters degree in economics D) None of these answers is correct. 2. What is the unemployment rate for a nation with 6 million employed and 2 million unemployed? A) 10 percent B) 15 percent C) 20 percent D) 25 percent 3. An unemployed person is best defined as an adult who A) does not have a job but is looking for work. B) is working fewer hours than she wants to. C) is a full-time homemaker or a full-time student and is therefore not working. D) has given up looking for work after being laid off for a long period of time. 4. Which of the following is an example of an unemployed person? A) a retiree working as a volunteer in a hospital B) a worker who is willing to work more hours if available C) a recent college graduate looking for her first job D) a full-time student working part time at night 5. Individuals who have given up looking for work but still would take a job are considered A) unemployed workers. B) displaced workers. C) discouraged workers. D) part of the labor force. 6. The short-term unemployment caused by the ordinary difficulties of matching employee to employer is called A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment. Page 2 7. Frictional unemployment is best defined as A) long-term unemployment caused by changing features of an economy. B) short-term unemployment caused by difficulties of matching employees to employers. C) unemployment caused by cyclical conditions of an economy. D) a normal level of unemployment caused by high wages. 8. The persistent, long-term unemployment caused by long-lasting shocks or permanent features of an economy is called A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment. 9. Unemployment correlated with the business cycle is called A) frictional unemployment. B) structural unemployment. C) cyclical unemployment. D) seasonal unemployment. 10. During recessions the unemployment rate A) decreases. B) increases. C) remains relatively constant. D) fluctuates randomly. 11. The natural unemployment rate is defined as the A) structural plus frictional unemployment rates. B) structural plus cyclical unemployment rates. C) frictional plus cyclical unemployment rates. D) frictional plus cyclical plus structural unemployment rates. Page 3 12. Adult population 200 million Labor force 150 million Employed persons 138.75 million Discouraged workers 10.5 million According to the accompanying labor data, the unemployment rate is _________ and the labor force participation rate is __________. A) 7 percent; 60.4 percent B) 0.7 percent; 99.3 percent C) 5.6 percent; 69.4 percent D) 7.5 percent; 75 percent 13. What do we call an increase in the average level of prices in an economy? A) recession B) stagflation C) deflation D) inflation 14. Inflation is best defined as an increase in A) the real price of a good or service. B) the price of one product relative to the price of another product. C) all prices in an economy. D) the average price level. 15. If a price index increased from 400 to 440 over the course of a year, then the inflation rate is A) 4 percent. B) 9 percent. C) 10 percent. D) 40 percent. 16. Which index measures price increases that typical American consumers face when shopping? A) CPI B) PPI C) GDP deflator D) GDP inflator Page 4 17. Which price index comprises the prices of all final goods and services produced within the economy? A) the consumer price index B) the GDP inflator C) the GDP deflator D) the producer price index 18. Which price index measures the average price received by producers? A) the consumer price index B) the GDP deflator C) the producer price index D) the wholesale price index Year Inflation Rate (Annual Percent Change) 1985 15.1% 1990 585.8% 1999 7.3% 2002 1.9% 2003 0.8% Source: International Monetary Fund (.imf.org”>www.imf.org) 19. This table shows actual inflation data for different periods of Polish history. Which year can you identify as hyperinflationary? A) 1985 B) 1990 C) 1999 D) 2003 20. A bank lends money for a year at an interest rate of 7 percent, and the inflation rate for that year turns out to be 5 percent. What is the bank’s real rate of return for that year? A) 2 percent B) 3.5 percent C) 6 percent D) 12 percent

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