ECO Chapter 10

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The labor force increases and, at the same time, technology
The production possibilities will definitely shift outward if:
improves
If the population of a country is 1,000,000 people, its labor force
8.0 percent
consists of 500,000 and 40,000 people are unemployed, the un-
(40,000/500,000)*100 = 8 %
employment rate is:
If the Consumer Price Index (CPI) had a value of 128 in 2007, this Prices of goods and services that the typical consumer buys
means that during the period between the base year and 2007: increased by an average of 28 percent
Which of the following government programs is most likely to
Greater government expenditures to increase GDP
reduce cyclical unemployment?
If the population of a country is 800,000 people, the number
9.09 percent
employed is 700,000 and the number of unemployed is 70,000,
(70,000/770,000)*100 = 9.09%
the unemployment rate is:
Unemployment that occurs when there are not enough jobs for the
Cyclical unemployment
number of people in the labor force is referred to as:
If the price of computers falls during a period when the average
A change in relative prices
price level remains constant, which of the following has occurred?
Which of the following is an example of the wealth effect during a You hold money in a savings account that earns 5 percent interest
period of inflation? while the price level doubles
The U.S. goal for price stability: Is an inflation rate of fewer than 3 percent
Which of the following is an essential part of the market mecha-
Changing relative prices
nism?
If an increase in the price of some goods outweighs other prices
Inflation
that remain constant or decrease then there is:
Which of the following is likely to reduce the level of structural
Federally funded job-training programs
unemployment?
Suppose a supply disruption causes oil prices to rise, which leads
to a recession in the United States and many Americans lose their
Cyclical unemployment
jobs. Which of the following types of unemployment would develop
in the U.S. economy?
As the economy falls from the peak to the trough of the business Cyclical unemployment should increase and real GDP should
cycle: decline
For a particular economy, the production possibilities curve shows
Maximum potential output
the:
Which of the following individuals is part of the labor force? A schoolteacher during the summer months
The CPI tends to overestimate the rate of inflation because: Some price increases are an indication of higher quality products
When construction workers seek work because the ground is
covered in snow and ice, the unemployment rate goes up. This Seasonal unemployment
situation is an example of:
The value of an original painting, held as an asset, increased in
value by 100 percent from 1970 to 2007. Suppose during the same
period average prices in the economy rose by 150 percent. The Lower real wealth as a result of the wealth effect
owner of the painting, relative to those who do not own paintings,
experienced a:
Inflation acts like a tax because: It takes income and wealth from some people and gives it to others
20.0 percent
In Table 10.2, what is the unemployment rate in Year 1?
(30/150)*100 = 20%
If the population of a country is 1,000,000 people, its labor force
10.0 percent
consists of 600,000 and 60,000 people are unemployed, the un-
(60,000/600,000) * 100 = 10%
employment rate is:
Which of the following is true during the expansionary phase of
Real GDP increases
the business cycle?

Higher unemployment rates

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 ECO Chapter 10
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Which of the following is characteristic of a downturn in the busi-
ness cycle?
"... businessmen traveling around the country found themselves
Based on the HEADLINE article titled "Inflation and the Weimar
borrowing funds from their customers each stage of the way. The
Republic", which of the following is the best illustration of the price
cash they'd allocated for the entire trip barely sufficed to pay the
effect of inflation?
way to the next stop"
The Full Employment and Balanced Growth Act of 1978 estab-
Under three
lished a goal for inflation of _______ percent.
Generally speaking, which of the following groups would tend to People who own assets that are appreciating faster than the
gain real income from the wealth effects of inflation? inflation rate
Structural unemployment occurs: Because of a mismatch between skills and jobs
Which person is considered part of the labor force? An unemployed autoworker actively looking for employment
Inflation is defined as An increase in the average level of prices
During a period of inflation: People who have borrowed money may be better off
A measure of changes in the average price of consumer goods
The Consumer Price Index is:
and services
15.8 percent
In Table 10.2, what is the unemployment rate in Year 10?
(30/190) * 100 = 15.8 %
Suppose the cost of medical care rose 200 percent from 1987 to
2007 and average prices for the economy rose 150 percent. Rel-
Lower real income as a result of the price effect
ative to others, people who purchased medical care experienced
a:
Which of the following is a member of the labor force? A major league baseball player
If the number of dollars you receive every year is the same, but
Stays the same but your real income falls
prices are rising, then your nominal income:
All persons over age 16 who are either working for pay or actively
The labor force
seeking paid employment refers to:
The total value of goods and services produced within a nation's
Real GDP
borders, measured in constant prices refers to:

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