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Questions Chapter 26

Questions for chapter 26 of Macro Economics
Suppose the CPI is currently 126, while its value one year previously it was 120. The rate of inflation over the past year was:
Inflation always:
reduces the purchasing power of the dollar but may have no impact on real income.
In 2010, Maxine's nominal income increased by 3% while the price level rose by 1%. Consequently, Maxine's real income:
rose by approximately 2%.
Orlando has just finished school and is searching for his first job. Orlando is considered to be:
frictionally unemployed.
The "full employment rate of unemployment" is:
around 4% - 5% because of frictional and structural unemployment.
At the deepest point of the Great Depression, most unemployment consisted of:
cyclical unemployment.
Occasionally, rapidly rising prices for basic inputs such as energy result in higher prices for many goods and services. The resulting inflation is best categorized as:
If the natural rate of unemployment is 5.5% and the actual unemployment rate is 6.5%, then, according to Okun's law the GDP gap is:
Suppose the total population is 200 million workers, 100 million of whom are in the labor force. 80 million people are employed full time and another 16 million are employed part time; 5 million people are "discouraged workers." The unemployment rate is:
Unanticipated inflation:
arbitrarily redistributes income from creditors to debtors.
In the depth of the Great Depression, the unemployment rate in the United States was about:
25 percent.
At the economy's natural rate of unemployment:
the economy achieves its potential output.
If the nominal interest rate is 8 percent and the real interest rate is 5 percent, then the inflation premium is 13 percent.
Answer the question on the basis of the following information about the hypothetical economy of Scoob. All figures are in millions.

Refer to the above information. If the natural rate of unemployment in Scoob is 5 percent, then:
cyclical unemployment is about 2 percent.
Unemployment involving a mismatch of the skills of unemployed workers and the skills required for available jobs is called:
structural unemployment.
The production of durable goods varies more than the production of nondurable goods because:
durables purchases are postponable.
An annual rate of inflation of 7 percent will double the price level in about 15 years.
The government agency responsible for collecting and reporting unemployment data is the:
Bureau of Labor Statistics.
If both the real interest rate and the nominal interest rate are 3 percent, then the:
inflation premium is zero.
During a period of hyperinflation:
people tend to hold goods rather than money.
Suppose that a person's nominal income rises by 5 percent and the price level rises from 125 to 130. The person's real income will:
rise by about 1 percent.
Which of the following types of unemployment is directly associated with insufficient overall demand for goods and services?
Cyclical unemployment
Suppose that lenders want to receive a real rate of interest of 5 percent, and that they expect inflation to remain steady at 2 percent in the coming years. Based on this, lenders should charge a nominal interest rate of:
7 percent.
The United States' economy is considered to be at full employment when:
about 4-5 percent of the labor force is unemployed.
The unemployment rate of:
teenagers is much higher than that of adults.
If potential GDP is $330 billion and there is a positive GDP gap of $30 billion, real GDP is:
$360 billion.
For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of:
Okun's law.
The type of unemployment associated with recessions is called:
cyclical unemployment.
Recently a labor union argued that the standard of living of its members was falling. A critic of the union argued that this could not possibly be true because the union had been acquiring increases in the nominal incomes of its members through collective bargaining. Is the critic correct?
No, because real income may fall if prices increase more proportionately than the increase in nominal income.
According to the Bureau of Labor Statistics, to be officially unemployed a person must:
be in the labor force.