PRETEST

1. The short-run Phillips curve shows ______ a relationship between ______. 

a. negative unemployment and inflation
b. positive unemployment and aggregate output
c. negative the aggregate price level and aggregate output
d. positive unemployment and the aggregate price level

2. An increase in expected inflation will shift the 

a. short-run Phillips curve downward
b. short-run Phillips curve upward
c. long-run Phillips curve upward
d. long-run Phillips curve downward
3. Bringing down inflation that has become embedded in expectations is called *

a. anti-inflation
b. deflation
c. disinflation
d. negative inflation
e.
Realization: disinflation is when inflation is occurring at a decreasing rate. An example of disinflation is a
2% inflation rate for one year, a 1% inflation rate for the next year, and a .5% inflation rate for the third
year

4. Debt deflation is 

a. a contributing factor in causing the Great Depression.

b. the effect of deflation in decreasing aggregate demand.
c. due to differences in how borrowers/lenders respond to inflation losses/gains.
d. all of the above.

5. Which of the following is true regarding prices in an economy?

I. The level of prices doesn’t matter. II. Increase in the price level is called inflation. III.
The rate of change in prices matters. 

a. I only
b. II only
c. III only
d. I, II, and III
6. If your nominal wage doubles at the same time as prices double, your real wage
will *
a. Decrease
 b. Double
c. Increase
d. not change

7. If inflation causes people to frequently convert their dollars into other assets, the
economy experiences what type of cost? 
a. monetary
b. price level
c. shoe-leather
d. unit-of-account

8. Because dollars are used as the basis for contracts, inflation leads to which type of
cost? 

a. price level
b. shoe-leather
c. menu
d. unit-of-account
9. To be considered unemployed, a person must I. not be working. II. be actively
seeking a job. III. be available for work. *

a. I only
b. II only
c. II and III
d. I, II, and III
Use the information for a hypothetical economy presented below to answer the
question: Population age 16 and older = 200,000 Labor Force = 100,000 Number of
people working part time = 20,000 Number of people working full time = 70,000 What
is the unemployment rate? 

10. What is the labor force participant rate?

a. 10%
b. 20%
c. 50%
d. 70%
11. How many people are unemployed?

a. 10,000
b. 20,000
c. 30,000
 d. 100,000
12. What is the unemployment rate?
a. 10%
b. 20%
c. 50%
d. 70%

13. The unemployment problem in an economy may be understated by the

unemployment rate due to *

a. discouraged workers
b. overemployed workers
c. people lying about seeking a job
d. job candidates with one offer but waiting for more

14. A person who moved to a new state and took two months to find a new job
experienced which type of unemployment? *

A. cyclical
B. frictional
C. natural
D. structural
15. A person who is unemployed because of a mismatch between the quantity of labor
supplied and the quantity of labor demanded is experiencing what type of
unemployment? 

a. cyclical
b. frictional
c. natural
d. structural