Macro Unit 2 Review

Inflation occurs when there is a sustained increase in which of the following?

• Real gross domestic product

• The average price level

• The price of any commodity

• The unemployment rate

A criticism of the consumer price index as a measure of the cost of living is that it

• understates the rate of inflation because the base year is outdated

• understates the rate of inflation because it only considers spending by typical urban consumers

• understates the rate of inflation because it reflects the increase in prices due to the introduction of new goods

• overstates the rate of inflation because it ignores consumers’ ability to substitute among similar items when prices change

The consumer price index (CPI) measures the

• value of current gross domestic product in base-year dollars

• prices of all consumer goods and services produced in the economy

• prices of a specific group of goods and services purchased by consumers

• prices of imports, but not exports

A continuous increase in the consumer price index (CPI) is

• deflation

• stagflation

• inflation

• recession

Which of the following is an example of structural unemployment?

• A computer programmer who leaves her job to move to Florida

• A worker who loses his job during a recession

• An autoworker who is replaced by a robot

• A worker who is engaged in unproductive work

An increase in the number of which of the following will lead to an increase in the unemployment rate?

• Discouraged workers

• Business start-ups

• Persons working 30 instead of 40 hours per week

• Persons quitting part-time jobs to look for full-time ones

Which type of unemployment would increase if workers lost their jobs because of a recession?

• Cyclical

• Frictional

• Seasonal

• Structural

Which of the following individuals is considered officially unemployed?

• Chris, who has not worked for more than three years and has given up looking for work

• Kim, who is going to school full-time and is waiting until graduation before looking for a job

• Pat, who recently left a job to look for a different job in another town

• Leslie, who retired after turning 65 only five months ago

The official unemployment rate understates the unemployment level in the economy because the official unemployment rate:

• ignores the duration of employment

• ignores underemployed and discouraged workers

• includes jobs created in the underground economy

• excludes frictionally unemployed workers

Which of the following best describes an economy at full employment?

• The rate of unemployment is zero.

• There is only structural and cyclical unemployment.

• There is frictional, but not cyclical, unemployment.

• There is only cyclical unemployment.