final_prep

Per	Now that the kids are in school for a full day,
son	this person is looking for work and has
A	interviewed for three jobs during the past two
	weeks.
Person B	This person has been laid off from a job but expects to be
	called back as soon as the economy improves.
Person C	This person has just graduated from college and will
	start a new job in three weeks. In the meantime this
	person will tour the great American beaches.
Person D	This person was laid off last year when new equipment
	was installed at the plant, reducing the number of
	workers needed. Shortly after being laid off, this person
	looked for a new job, was unable to find one, and then
	stopped looking for work.
70) The above table shows answers given by people interviewed in a government survey of								70) ______
households. Which individuals are considered to be a part of the labor force?
	A) C and D		B) A, C, and D		C) B, C, and D		D) A, B, and C
71) Based on the following data for the country of Tiny Town, the employment-to-population ratio								71) ______
equals ________ multiplied by 100.
Population = 200
Working age population = 100
Labor Force = 90
Number of employed persons = 75
	A) 75/100.		B) 90/100.		C) 90/200.		D) 75/200
			Numbe
	Component		r of
			people
Total population			2600
Working-age population			2000
Not in labor force			500
Employed			1300
72) Using the information in the table above, calculate the number of people in the labor force.								72)	______
	A) 1500		B) 2500		C) 800		D) 2100
73) Using the information in the table above, calculate the unemployment rate.								73)	______
	A) 30.8 percent		B) 7.7 percent		C) 13.3 percent		D) 53.3 percent
74) Using the information in the table above, calculate the employment-to-population ratio.								74)	______
	A) 75 percent		B) 65 percent		C) 23.2 percent		D) 50 percent
75) The real wage rate is								75)	______

A)the money wage rate multiplied by the price level.

B)the money wage rate divided by the price level.

C)the money wage rate divided by the number of employed workers.

D)None of the above answers are correct.

76)	Full-time students and prisoners are ________.		76)	______
	A) not in the labor force	B) counted as unemployed
	C) counted as discouraged workers	D) in the labor force
77)	When a student finishes college and begins looking for work,		77)	______

A)cyclical unemployment increases.

B)frictional and cyclical unemployment increase.

C)frictional unemployment increases.

D)structural unemployment increases.

78) When a worker quits a job to look for a better job,

78) ______

A)cyclical unemployment increases.

B)structural and cyclical unemployment increase.

C)structural unemployment decreases.

D)frictional unemployment increases.

79) When the economy switches production toward services and away from manufacturing and	79) ______
workers in the manufacturing industry are permanently laid off,
A) structural unemployment increases.
B) frictional unemployment decreases.
C) cyclical unemployment increases.
D) frictional and cyclical unemployment increase.

Per	This person has just graduated from high school
son	and is working at a part-time job but wants a
A	full-time job.
Person B	At the age of 45, this person was laid off from the
	automobile industry when new equipment was installed
	and the person did not have the skills necessary to use
	the equipment. This person now is searching to find a
	new job.
Person C	As a result of this person's spouse be-ing transferred to
	a job in a new city, this person is looking for a new job.
Person D	This person just graduated from college and is looking
	for an engineering job. In the meantime, this person is
	working full-time waiting tables.
80) The above table shows answers given by people interviewed in the Current Population Survey.						80) ______
Which people are structurally unemployed?
	A) B and C.	B) A, B, and C	C) A, B, and D		D) A, B, C, and D
81) Cyclical unemployment						81) ______

A)occurs when technology improvements change job requirements.

B)may increase or decrease during an expansion.

C)is due mainly to job leavers.

D)fluctuates over the business cycle.

82) If a worker is temporarily laid off because the economy is in a recession,		82) ______
A) the size of the labor force rises.	B) structural unemployment increases.
C) cyclical unemployment increases.	D) frictional unemployment increases.

83) Full employment occurs

83) ______

A)only if unemployment is equal to structural unemployment plus cyclical unemployment.

B)only if the unemployment rate is zero.

C)only if the unemployment rate is equal to the natural rate of unemployment.

D)None of the above answers are correct.

84) Full employment means

84) ______

A)only cyclical unemployment exists.

B)zero unemployment.

C)only frictional and structural unemployment exists.

D)None of the above answers are correct.

85) The natural unemployment rate is

85) ______

A)the unemployment rate when the economy is at potential GDP.

B)occurs when only there is no cyclical unemployment present.

C)not a fixed percentage of the labor force.

D)All of the above answers are correct.

86)	The natural unemployment rate is the unemployment rate that exists when there is no				86)	______
	A) structural unemployment.		B) cyclical or structural unemployment.
	C) cyclical unemployment.		D) frictional unemployment.
87)	Suppose that the natural unemployment rate is 4.5 percent and the actual unemployment rate is				87)	______
	3.5 percent. Then cyclical unemployment is
	A) 0 percent.	B) 8 percent.	C) -1 percent.	D) 1 percent.
88)	Which of the following statements is true?				88)	______

A)Potential GDP is the same as real GDP.

B)Real GDP fluctuates around potential GDP.

C)Potential GDP fluctuates around real GDP.

D)When all of the economy's resources are fully employed, the value of production is called real GDP.

89)	In a country with a working-age population of 130 million, 90 million workers are employed				89)	______
	and 10 million workers are unemployed. What is the unemployment rate?
	A) 10.0 percent	B) 7.7 percent	C) 5.0 percent	D) 7.1 percent
90)	At the natural unemployment rate, there is no				90)	______
	A) frictional unemployment.		B) cyclical unemployment.
	C) unemployment.		D) structural unemployment.
91)	The natural unemployment rate ________.				91)	______

A)equals zero

B)is the unemployment rate when there is no cyclical unemployment

C)is greater than the actual rate of unemployment

D)is the same from year to year

92) During a recession, the ________.

92) ______

A)unemployment rate decreases

B)employment-to-population ratio increases

C)number of aggregate hours worked increases

D)number of discouraged workers increases

93) The consumer price index (CPI)

93) ______

A)compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period.

B)is the ratio of the average price of a typical basket of goods to the cost of producing those goods.

C)measures the increase in the prices of the goods included in GDP.

D)compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period 2.

			Inflatio
	Year	Price	n rate
		index	(percen
			t)
	1	100
	2	117	A
	3	125	B
	4	120	C
	5	D	8.3
	6	150	E

94)	In the table above, what inflation rate belongs in space A?				94)	______
	A) 8.3 percent	B) 17.0 percent	C) -4.0 percent	D) 6.8 percent
95)	In the table above, what inflation rate belongs in space B?				95)	______
	A) 17.0 percent	B) -4.0 percent	C) 8.3 percent	D) 6.8 percent
96)	At the end of last year the Consumer Price Index was equal to 163.8 and at the end of this year it				96)	______
	was equal to 157.5. What is the inflation rate over this time period?
	A) 3.85 percent	B) 4.0 percent	C) 10.1 percent	D) 6.3 percent
97)	If the price level last year was 220 and this year is 250, what is the inflation rate between the two				97)	______
	years?
	A) 20 percent	B) 13.6 percent	C) 30 percent	D) 12.2 percent
98)	Suppose that last year the Consumer Price Index was 124; this year it is 130.7. What was the				98)	______
	inflation rate between these years?
	A) 5.4 percent	B) 6.7 percent	C) 30.7 percent	D) 5.1 percent
99)	Of the following sequences of price levels, which correctly represents a 5 percent inflation rate?				99)	______
	A) 100, 100, 100, 100		B) 100, 105, 105, 105
	C) 100, 105, 110.25, 115.76		D) 100, 105, 110, 115
100)	The Consumer Price Index for country Beta at the end of last year was equal to 203.5 and at the				100)	_____
	end of this year it was 199.6. On the basis of this information which of the following statements
	is true?

A)Beta experienced an inflation rate of 1.9 percent.

B)Beta experienced a deflation rate of 3.9 percent.

C)Beta experienced an inflation rate of 3.9 percent.

D)Beta experienced a deflation rate of 1.9 percent.

101)	The CPI basket contains 400 oranges and 800 pens. In the base year, the price of an orange is				101)	_____
	$1.00 and the price of a pen is $0.75. This year, urban consumers each buy 300 oranges at $2.00
	each and 850 pens at $1.00 each. The CPI this year is ________.
	A) 140	B) 160	C) 1.60	D) 62.5
102)	Along a production possibilities frontier for real GDP and the quantity of leisure time, as leisure				102)	_____
	time increases, real GDP
	A) stays the same		B) could increase, decrease or stay the same
	C) increases		D) decreases
103)	Along the production function, as the quantity of labor rises, real GDP				103)	_____
	A) rises		B) may fall, rise, or stay the same
	C) stays the same		D) falls
104)	A movement along the production function is the result of a change in				104)	_____
	A) technology		B) the quantity of labor
	C) capital		D) interest rates
105)	When the quantity of labor employed increases with no change in the nation's production				105)	_____
	function, the marginal product of labor

A)increases

B)diminishes

C)remains the same

D)might change but more information is needed to determine if it increases or diminishes.

106) The money wage rate measures the

106) _____

A)2000 dollar value of a unit of labor supplied by a worker.

B)constant dollar level of real disposable income.

C)number of dollars earned by an hour of labor.

D)quantity of goods and services that can be bought with an hour of labor.

107) The real wage rate equals

107) _____

A)(money wage) + (number of hours worked)/(price level).

B)(100) × (price level)/(money wage rate).

C)(100) × (money wage rate)/(price level).

D)(money wage rate) × (price level).

108) If the money wage rate is $15.00 per hour and the price level is 120, the real wage rate is			108) _____
A) $12.50 per hour.		B) $10.75 per hour.
C) $15.00 per hour.		D) $8.50 per hour.
Quantity of	Output
labor	(units
(hours of	per
work)	hour)
0	0
1	9
2	16
3	21
4	24

	5		25
109)	Based on the previous table, the marginal product of the second hour is						109)	_____
	A) 9 units.			B) 7 units.	C) 16 units.	D) 8 units.
110)	If the price level falls by 5 percent and workers' money wage rates remain constant, firms'						110)	_____

A)quantity of labor demanded will decrease.

B)supply of jobs will increase.

C)quantity of labor demanded will increase.

D)None of the above answers are correct.

111) Suppose the money wage rate and the price level both fall by 5 percent. As a result,

111) _____

A)the quantity of labor demanded increases.

B)the quantity of labor demanded decreases.

C)people are worse off and there is more unemployment.

D)the quantity of labor demanded does not change because there is no change in the real wage.

112) If the real wage increases, the

112) _____

A)income effect causes people to want to work more.

B)opportunity cost of not working increases and so people will want to work more.

C)opportunity cost of not working decreases so people will want to work less.

D)income effect causes people to maintain their current level of work.

113) Suppose that the money wage rate is $22 per hour and that the price level is 100. If the money		113)	_____
wage rate falls to $11 per hour and the price level falls to 50, what happens to the real wage rate?
A) The real wage rate falls.
B) The real wage rate does not change.
C) The real wage rate doubles.
D) The real wage rate rises but does not double.
114) Five workers produce total output of $200; six workers produce total output of $222. The		114)	_____
marginal product of the sixth worker equals
A) $37.	B) $22.
C) $40.	D) None of the above answers is correct.

115)An increase in labor productivity

A)labor supply curve leftward

C)labor supply curve rightward.

115) _____

B) labor demand curve leftward. D) labor demand curve rightward.

116) In the above figure, at the real wage rate of $50

116) _____

A)there is a surplus of 100 billion hours per year.

B)there is a surplus of 60 billion hours per year.

C)there is a shortage of 100 billion hours per year.

D)there is shortage of 20 billion hours per year.

117) In the above figure, what is the full-employment real wage rate and quantity of hours per year?						117)	_____
A) $35 and 100 billion hours per year				B) $40 and 60 billion hours per year
C) $50 and 40 billion hours per year				D) $50 and 100 billion hours per year
118) When the real wage rate falls, ________.						118)	_____
A) the quantity of labor demanded				B) the labor demand curve shifts rightward
increases
C) a shortage of labor decreases				D) the labor demand curve shifts leftward
Quantity of		Real GDP
leisure
		(trillions of
(billions of
		2000 dollars
hours per
		per year)
year)
100		9.5
150		9.0
200		8.0
250		6.5
300		4.5
119) The table above shows the relationship between leisure and real GDP in the country of Progress.						119)	_____
The citizens of Progress have 400 billion hours each year to spend between leisure and labor. If
the quantity of labor increases from 150 billion hours to 200 billion hours a year, the marginal
product of labor is ________.
A) $1.5 trillion		B) $8.0 trillion		C) $30 an hour	D) $15 an hour
120) If a person is unemployed and has no income, the opportunity cost of a job search is ________						and	a

worker is 120)			____
likely to			_
search
for a
________
period of
time.
A) high; long	B) low; short	C) high; short	D) low; long
121) If the real wage rate is greater than the equilibrium wage rate, the result is			121) _____

A)full employment

B)higher than normal unemployment

C)lower than normal unemployment

D)None of the above answers is correct because wages have no effect on unemployment

Wage		Labor
rate	Labor
		deman
(dollars	supply
		d
per	(hours)
		(hours)
hour)
22	900	940
23	910	930
24	920	920
25	930	910
26	940	900
27	950	890
122) Using the data in the above table, suppose that the minimum wage is $25 per hour. Then				122) _____

A)there is more unemployment than there would be without the minimum wage.

B)at the minimum wage, the quantity of labor demanded exceeds the quantity supplied.

C)the minimum wage has no effect because it is below the equilibrium wage.

D)the minimum wage has no effect because it is above the equilibrium wage.

123)	The unemployment rate at full employment is ________.		123)	_____
	A) zero
	B) between 0 and 1 percent
	C) continually decreasing as the economy grows
	D) the natural unemployment rate
124)	The time spent on job search rises when ________.		124)	_____
	A) unemployment compensation decreases	B) more young people enter the labor force.
	C) unemployment compensation increases	D) the efficiency wage rate is lowered
125)	The capital stock in the economy is the total		125)	_____

A)financial assets held by firms.

B)quantity of plant and equipment owned by governments.

C)quantity of plant, equipment, and inventories.

D)financial assets of the public.

126) Approximately, the real interest rate ________ the inflation rate ________ the nominal interest	126) _____
rate.

A) equals; plus

B) plus; equals

C) minus; equals

D) equals; minus

127)	In the above figure, in the absence of efficiency wages, if the real wage is $20 per hour, money	127)	_____
	wages could
	A) rise or the price level could fall to eliminate unemployment given by ac.
	B) fall or the price level could fall to eliminate unemployment given by ac.
	C) rise or the price level could rise to eliminate unemployment given by ab.
	D) fall or the price level could rise to eliminate unemployment given by ab.
128)	When the inflation rate is zero, the	128)	_____

A)real interest rate is less than the nominal interest rate.

B)real interest rate is greater than the nominal interest rate.

C)real interest rate equals the nominal interest rate.

D)nominal interest rate is zero.

129)	The real interest rate is 4 percent a year. When the inflation rate is zero, the nominal interest rate				129)	_____
	is approximately ________ percent a year; and when the inflation rate is 2 percent a year, the
	nominal interest rate is approximately ________ percent a year.
	A) 6; 4	B) 0; 2	C) 6; 8	D) 4; 6
130)	Suppose a firm borrows funds to finance investment. The opportunity cost of this investment				130)	_____

A)is equal to the real interest rate.

B)is less than if the firm used its retained earnings.

C)is greater than the real interest rate.

D)is greater than if the firm used its retained earnings.

131) If the expected profit rate on an investment project is 20 percent per year, a firm will undertake	131) _____
the project as long as the
A) nominal interest rate is more than 20 percent.
B) real interest rate is less than 20 percent.
C) real interest rate is more than 20 percent.
D) nominal interest rate is less than 20 percent.

132) The demand for loanable funds curve is drawn with loanable funds on the horizontal axis and

132) _____

A)consumption on the vertical axis.

B)time on the vertical axis.

C)the real interest rate on the vertical axis.

D)the investment price deflator on the vertical axis.

133) Greater optimism about the expected profits from investment projects

133) _____

A)shifts the demand for loanable funds curve leftward.

B)causes a movement upward along the demand for loanable funds curve.

C)shifts the demand for loanable funds curve rightward.

D)causes a movement downward along the demand for loanable funds curve.

134)	In the above figure, a decrease in the real interest rate will result in a movement from point E to				134)	_____
	A) point F.	B) point I.	C) point H.	D) point G.
135)	In the above figure, an increase in the expected profit rate will result in a movement from point E				135)	_____
	to
	A) point H.	B) point G.	C) point I.	D) point F.
136)	In the above figure, a decrease in the expected profit rate will result in a movement from point E				136)	_____
	to
	A) point G.	B) point F.	C) point I.	D) point H.
137)	All of the following are sources of loanable funds except				137)	_____
	A) government budget surplus.		B) international borrowing.
	C) business investment.		D) private saving.
138)	Which of the following influences household saving?				138)	_____

I)The real interest rate.

II)Disposable income.

III)Expected future income.

A) I and III	B) I, II, and III	C) I	D) I and II
139) In the market for loanable funds, the supply comes from			139) _____
A) saving, the government budget surplus and international borrowing