Multiple Choice
Identify the choice that best completes the
statement or answers the question.
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1.
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What is the difference between seasonal unemployment and structural
unemployment?
a. | Seasonal unemployment occurs because of schedules, whereas structural occurs because
people lack skills. | b. | Seasonal unemployment is rare in a modern
society, whereas structural is not. | c. | Seasonal unemployment occurs only in the
summer, whereas structural can occur all year round. | d. | Seasonal unemployment is generally among
low-paid workers, whereas structural is among the highly paid. |
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2.
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When the economy is working properly, what is the unemployment rate?
a. | 0 to 3 percent | c. | 8 to 10 percent | b. | 4 to 6 percent | d. | 10 to 12
percent |
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3.
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The “market basket” that is used by the Bureau of Labor Statistics
to calculate prices is made up of which of the following?
a. | food items only | b. | nonfood items only | c. | typical goods and
services for an urban household | d. | food and necessary services for any
family |
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4.
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How has the distribution of income in the United States changed over the last 20
years?
a. | It has become more equal. | b. | It has become less equal. | c. | It became more equal
for about 10 years but has become less equal. | d. | It has not changed
appreciably. |
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5.
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What is workfare?
a. | welfare that is limited to preschool-age children | b. | a state-by-state
grant program of aid to the elderly | c. | a program that requires work in exchange for
assistance | d. | an early poverty program from the 1950s |
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6.
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How does the Bureau of Labor Statistics determine how the market basket should
change over time?
a. | by evaluating the census | b. | by conducting a Consumer Expenditure
Survey | c. | by calculating the inflation rate | d. | by computing the Consumer Price
Index |
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7.
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What does it mean when a person is underemployed?
a. | The person has been working but now is laid off. | b. | The person is
looking for work in a special field. | c. | The person is not making as much money as they
need. | d. | The person has a job but they are overqualified for
it. |
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8.
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According to the demand-pull theory, what is responsible for inflation?
a. | Producers raise prices to meet existing demand. | b. | The economy is in a
wage-price spiral. | c. | Too much money is in
circulation. | d. | Demand for goods and services exceeds existing
supply. |
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9.
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What is a major problem for businesses during a period of chronic
inflation?
a. | They cannot anticipate their costs. | b. | Their money loses its
value. | c. | They do not know when the inflation will stop. | d. | They have difficulty
hiring help. |
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10.
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Which of the following is a result of unemployment that is very low?
a. | The few people who are unemployed stop looking for jobs. | b. | Wages drop below the
level of minimum wage. | c. | Companies have difficulties recruiting
workers. | d. | Companies stop looking for people to fill unfilled
jobs. |
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11.
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According to the cost-push theory, what is responsible for inflation?
a. | Producers raise prices to meet increased costs. | b. | Demand for goods and
services exceeds existing supply. | c. | Too much money is in
circulation. | d. | The economy is operating as though there was a war. |
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12.
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Which of the following is correct? The unemployment rate is
a. | unemployment/population ´ 100. | b. | (employed – unemployed)/labor force
´ 100. | c. | (labor force – employed)/ labor force ´ 100. | d. | (employed –
labor force)/employed ´ 100. |
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13.
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If the number of people classified as unemployed is 50,000 and the number of
people classified as employed is 250,000, what is the unemployment rate?
a. | 8% | c. | 16.17% | b. | 8.7% | d. | 11.5% |
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14.
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If the number of people employed is 150,000 and the labor force is 160,000, the
unemployment rate is
a. | 6.25%. | c. | 2.5%. | b. | 10.25%. | d. | 6.55%. |
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15.
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When Alison, a college math professor, leaves her job at a small rural college
and starts looking for a job at large urban university, she is
a. | frictionally unemployed. | c. | cyclically
unemployed. | b. | structurally unemployed. | d. | a discouraged worker. |
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16.
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A knitting factory worker who loses her job because the company has relocated
the plant to another country is an example of
a. | frictional unemployment. | c. | cyclical
unemployment. | b. | structural unemployment. | d. | seasonal unemployment. |
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17.
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If the CPI for 2001 was 177 and the CPI for 2002 was 180, the rate of inflation
between 2001 and 2002 was
a. | 1.96%. | c. | 4.66%. | b. | 2.69%. | d. | 1.69%. |
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18.
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If Jackson is paid an interest rate of 10% on his savings, but the inflation
rate has risen to 20%, the purchasing power of his savings is
a. | decreased by 10%. | c. | increased by 10%. | b. | increased by 20%. | d. | decreased by
20%. |
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19.
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Which of the following might cause the inflation rate to spike up
sharply?
a. | The items in the CPI market basket change to account for changing consumer buying
habits. | b. | The purchasing power of the average consumer decreases due to a sluggish
economy. | c. | Prices on world oil markets rise steeply due to war in the Middle
East. | d. | Plentiful rainfall and moderate temperatures result in good harvests of wheat and
soybeans. |
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20.
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Economists look to which of the following explanations for inflation?
a. | too much money in the economy | b. | demand for goods exceeds supply, as in
wartime | c. | producers raise prices in order to meet increased costs | d. | all of the
above |
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21.
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What is the possible consequence of the following scenario? Because of high
unemployment rates in the country of Lavernia, employers offer higher wages. To meet their higher
payroll costs and maintain profits, they charge consumers more for goods and services.
a. | a prolonged period of deflation | b. | demand-pull inflation | c. | a wage-price spiral
of ever-increasing prices | d. | increasing numbers of people living on a fixed
income |
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22.
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Which of the following families is statistically the most likely to live below
the poverty threshold?
a. | a two-parent family of Hispanic origin living in the inner city | b. | a black family
headed by a single mother living in the inner city | c. | a black family headed by a single mother living
in the suburbs | d. | a two-parent white family living in a rural area |
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23.
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Which of the following people is most likely to be classified as “working
poor”?
a. | Dolores, who has an advanced degree and works 40 hours a week | b. | Jason, who is
working part time as a construction worker so he can devote time to starting up a real estate
business | c. | Jim, who is a full-time student with a work study job in the college
library | d. | Carol, a single mother who works 35 hours a week at a job that pays slightly above
minimum wage |
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24.
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When plotted on a Lorenz Curve, the income distribution curve for the town of
Lakeview is a straight line from 0 to 100%. This means that
a. | The lowest three fifths of the population earns about the same amount as the highest
two fifths. | b. | Everyone in Lakeview earns about the same income. | c. | The lowest fifth of
Lakeview’s population earns about 20 percent less than the highest fifth. | d. | There is not enough
information to answer the question. |
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25.
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Which of the following is most likely to be worried about high inflation?
a. | a factory worker | c. | a doctor with a suburban practice | b. | a
shopkeeper | d. | a retired couple
on a fixed income |
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26.
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If Bob loses his job at the GM plant because car manufacturing is slow due to a
downturn in the economy, you can conclude that he is
a. | cyclically unemployed. | c. | structurally unemployed. | b. | seasonally
unemployed. | d. | frictionally
unemployed. |
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Matching
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Identifying Key Terms
Match each term with the correct
statement below. a. | census | f. | food stamps | b. | inflation | g. | fixed income | c. | discouraged worker | h. | full employment | d. | unemployment
rate | i. | price
index | e. | enterprise zone | j. | hyperinflation |
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27.
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percentage of the nation’s labor force that is not employed
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28.
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a general increase in prices
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29.
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income that does not increase even when prices go up
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30.
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area where companies can locate free of certain local, state, and federal taxes
and restrictions
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31.
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a person who wants a job but has given up looking
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32.
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a measurement that shows how the average price of a standard group of goods
changes over time
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33.
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government-issued coupons that are exchanged for food
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34.
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an official count of the population
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Identifying Key Terms
Match each term with the correct
statement below. a. | chronic inflation | f. | block grant | b. | deflation | g. | quantity theory | c. | frictional employment | h. | creeping inflation | d. | wage-price
spiral | i. | purchasing
power | e. | poverty threshold | j. | market basket |
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35.
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what occurs when people take time to find a job
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36.
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the ability to buy goods and services
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37.
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inflation that remains low for a long time
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38.
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a sustained drop in the price level
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39.
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inflation that rises steadily from month to month over a long period
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40.
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the income level below which income is insufficient to support a family or a
household
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41.
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federal funds given to the states in lump sums
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42.
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the idea that too much money in the economy causes inflation
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