Download Chapter 7--Unemployment and Inflation

Chapter 7—Unemployment and Inflation
MULTIPLE CHOICE
1. A major cost of unemployment is lost production.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Unemployment
2. Discouraged workers are included in the labor force figures but not in unemployment figures.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Unemployment
3. Which of the following is not a cost of unemployment?
a. Unemployed individuals suffer a loss of income.
b. Unemployed individuals are more likely to have emotional or psychological problems.
c. Unemployed individuals can lose their job skills over time.
d. Unemployment causes production to decrease from what it could be.
e. The opportunity cost of unemployment is a higher inflation rate.
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Unemployment
4. Which of the following is not considered a cost of unemployment?
a. loss of self-respect by those who are unemployed
b. waste of the economy's resources
c. negative psychological effects on those who have lost their jobs
d. higher inflation rates
e. loss of income by those who are unemployed
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: Unemployment
5. Measured unemployment includes discouraged workers.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Measuring Unemployment
6. The unemployment rate rises any time there is an increase in the number of unemployed.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Measuring Unemployment
7. The labor force consists of all adults who are currently employed.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Measuring Unemployment
8. Inmates from the county prison who are on work release are counted as part of the labor force.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Measuring Unemployment
9. The labor force consists of all
a. the people in the economy who are not retired
b. people in the economy over 16 years of age
c. the adults in the economy between 18 and 65 years old who are able to work
d. the noninstitutionalized population over 16 in the economy who hold jobs or are looking
for them
e. the citizens in the economy who are graduates of high school
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Measuring Unemployment
10. Which of the following people would be counted in the labor force?
a. Chou, who lost his job and last looked for work three months ago
b. Stephanie, who holds a Ph.D. in history, but can only find part-time employment at a
fast-food restaurant
c. Jordan, who would like to work as a stockbroker but is now a househusband
d. Steffan, who thinks he could easily earn $100,000 per year, despite the opinion of the
psychiatrist at the state hospital where he is a patient
e. Monique, age 90, who is enjoying her retirement in Montana
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Measuring Unemployment
11. People who are not currently employed, but say they want a job, are counted as unemployed only if
they
a. have previously held a job
b. are actively seeking employment
c. are willing to accept a reasonable offer
d. are between 16 and 65 years of age
e. are willing to accept any offer of employment
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Measuring Unemployment
12. The unemployment rate is the
a. percentage of people in the economy who do not hold jobs
b. percentage of the labor force that does not have a job
c. number of people in the economy who have given up looking for employment
d. number of people in the labor force without jobs
e. ratio of unemployed to employed high school graduates in the economy
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Measuring Unemployment
13. Consider an economy made up of 100 people, 60 of whom hold jobs, 10 of whom are looking for
work, and 15 of whom are retired. The number of people in the labor force is
a. 30
b. 60
c. 85
d. 90
e. 70
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Measuring Unemployment
14. Consider an economy made up of 100 people, 60 of whom hold jobs, 10 of whom are looking for
work, and 15 of whom are retired. The number counted as unemployed is
a. 10
b. 15
c. 40
d. 30
e. 90
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Measuring Unemployment
15. The unemployment rate will increase whenever there is a(n)
a. increase in the number of persons classified as unemployed
b. increase in the number of unemployed relative to the size of the labor force
c. increase in the size of the U.S. population and there is no change in the number of persons
classified as employed
d. reduction in the size of the labor force
e. reduction in the size of the labor force while the number of unemployed decreases
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Measuring Unemployment
16. Consider an economy with an adult population of 100, 50 of whom hold jobs, 10 of whom are looking
for work, and 15 of whom are retired. The labor force participation rate is
a. 100 percent
b. 60 percent
c. 50 percent
d. 40 percent
e. 10 percent
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Measuring Unemployment
17. Suppose U = the number of adults who are unemployed; E = the number of adults who are employed;
and NLF = the number of adults not in the labor force. Which expression would equal the
unemployment rate?
a. U/(E + NLF)
b. U/E
c. U/(U + E)
d. U/(E + NLF)
e. U/(U + E - NLF)
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Measuring Unemployment
18. Suppose U = the number of adults who are unemployed; E = the number of adults who are employed;
and NLF = the number of adults not in the labor force. Which expression would equal the labor force
participation rate?
a. U/(U + E)
b. E/(U + E)
c. U/(U + E + NLF)
d. E/(U + E + NLF)
e. (U + E)/(U + E + NLF)
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Measuring Unemployment
19. A discouraged worker is one who
a. is underqualified for his current job
b. dislikes his current job but is afraid to quit
c. drops out of the labor force because he cannot find a job
d. quits his job because the possibility of advancement was very low
e. is overqualified for his current job
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Measuring Unemployment
20. Which of the following are classified as "discouraged workers"?
a. all those between 16 and 65 who are neither disabled nor in an institution and are also
neither employed nor seeking employment
b. labor force members who have chosen early retirement because they dislike their work or
think the pay is too low
c. members of the noninstitutional population who say they want to be employed but are not
searching for a job
d. members of the labor force who are looking for a job but cannot find one
e. anyone in the population who is not working
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Measuring Unemployment
21. Which of the following people would be counted as unemployed?
a. a retired naval officer
b. a full-time student in high school
c. a father of preschool children who does not want to work
d. an inner-city teenager who has given up looking for work after a year of trying
e. a downhill ski instructor who looks for work during the summer
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Measuring Unemployment
22. If top government officials claim that "more people are working now than ever before," which of the
following must be true?
a. The unemployment rate is lower now than ever before.
b. The number of people unemployed is lower now than ever before.
c. The employment rate is higher now than ever before.
d. The number of people in the labor force is higher now than ever before.
e. The number of people employed is higher now than ever before.
ANS: E
PTS: 1
DIF: Hard
NAT: Reflective Thinking
LOC: Unemployment and inflation
TOP: Measuring Unemployment
23. Which of the following is true about labor force participation?
a. When workers become unemployed, the labor force participation rate declines.
b. When the unemployed become "discouraged workers," the labor force participation rate
declines.
c. When workers are not fully using their skills, the labor force participation rate decreases.
d. Since the 1950s the labor force participation rate of women has decreased in the United
States.
e. The trend toward earlier retirement has increased the labor force participation rate in the
United States.
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Measuring Unemployment
24. Suppose the official unemployment rate is 10 percent. We can conclude without question that
a. the same 10 percent of the people in the economy were out of work for the entire year
b. one of every ten people in the labor force is currently unemployed
c. the same 10 percent of the people in the labor force were out of work for the entire year
d. every person in the labor force was out of work for 10 percent of the year
e. 10 percent of the people in the economy were each out of work for 10 percent of the year
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Measuring Unemployment
25. Which of the following is not a way to become officially unemployed?
a. quit your job to look for a better job in another part of the country
b. be fired from your job
c. look for a job after being out of the labor force for five years
d. retire
e. look for a job only for the period in the summer that you are out of school
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Measuring Unemployment
26. Which of the following people would be counted among the unemployed?
a. a new college graduate selling newspaper advertising part-time while looking for other
work
b. a new college graduate selling newspaper advertising full-time while looking for other
work
c. a new college graduate selling newspaper advertising part-time and not looking for other
work
d. a new college graduate who gets tired of selling newspaper advertising and takes off on a
motorcycle trip to Alaska
e. a new college graduate not qualified for any of the jobs available in his small town
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Measuring Unemployment
27. Which of the following people would be classified as unemployed?
a. a person who wants a job as a fashion model but cannot find work in that field
b. someone who quits a part-time job to attend school full-time
c. someone who gives up looking for a job
d. a person who works at a job that underemploys his or her skills
e. a person who works part-time and would rather work full-time
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Measuring Unemployment
28. The unemployment rate will decrease whenever there is a(n)
a. increase in the number of persons classified as unemployed
b. decrease in the number of unemployed relative to the size of the labor force
c. decrease in the size of the population and there is no change in the number of persons
classified as employed
d. reduction in the size of the labor force
e. decrease in the number of unemployed and the population does not change
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: Measuring Unemployment
29. The labor force participation rate for women in the United States has
a. stayed the same over the last 30 years
b. increased significantly since the 1950s
c. been influenced by decreasing real wages since 1960
d. fluctuated substantially both upward and downward since the 1950s
e. increased only very slightly since the 1950s
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Labor Force Participation Rate
30. Which of the following is true regarding labor force participation rates in the United States since the
1950s?
a. The rates for both men and women have risen.
b. The rate for women has fallen; that for men has risen.
c. The rate for men has fallen; that for women has increased.
d. The rates for both men and women have fallen.
e. The rates for both men and women have remained fairly constant.
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Labor Force Participation Rate
31. The labor force participation rate is the number of people
a. employed divided by the adult population
b. employed divided by the number of people in the labor force
c. in the labor force divided by the adult population
d. unemployed divided by the number of people in the labor force
e. in the labor force divided by the number of people employed
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Labor Force Participation Rate
32. Since the end of World War II, the U.S. unemployment rate
a. has displayed a downward trend
b. has displayed an upward trend
c. has remained almost constant from year to year
d. was generally higher during the 1970s than during the 1990s
e. has not displayed any clear pattern
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Unemployment Over Time
33. Since World War II, the U.S. economy has experienced
a. a decrease in the civilian labor force
b. a decrease in the number of unemployed persons
c. a decrease in the number of employed persons
d. an increase in the labor force participation rate of women
e. a declining unemployment rate as a general trend
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Unemployment Over Time
34. When workers are over-qualified for their current jobs or can find only part-time work, we say they are
a. unemployed
b. discouraged workers
c. not in the labor force
d. overemployed
e. underemployed
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Unemployment Over Time
35. The unemployment rate for blacks in the United States is higher than that for whites.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Unemployment in Various Groups
36. Different demographic groups
a. have identical durations of unemployment
b. have identical unemployment rates
c. are weighted equally in the official unemployment rate
d. have different unemployment rates
e. are weighted more heavily in the official unemployment rate if they have larger
unemployment rates
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Unemployment in Various Groups
37. Which of the following groups tends to have the highest unemployment rate in the United States?
a. black teenagers
b. black men
c. white women
d. black women
e. white teenagers
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Unemployment in Various Groups
38. Since World War II, labor force participation rates have
a. increased for males and females
b. remained nearly constant for males and increased for females
c. decreased for males and decreased for females
d. increased for males and decreased for females
e. decreased for males and increased for females
ANS: E
PTS: 1
DIF: Moderate
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment in Various Groups
39. An individual with a Ph.D. in physics, who can find employment only in a pizza parlor, would be
considered as
a. a discouraged worker
b. underemployed
c. overemployed
d. unemployed
e. not in the labor force
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Unemployment in Various Groups
40. A recent college graduate who is still looking for their first job, would be considered as
a. a discouraged worker
b. underemployed
c. overemployed
d. unemployed
e. not in the labor force
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Unemployment in Various Groups
41. An accountant who lost their job in the last recession who gives up looking for work after 12 months
of unsuccessful job search, would be considered as
a. a discouraged worker
b. underemployed
c. not in the labor force
d. unemployed
e. both a and c
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Unemployment in Various Groups
42. Which of the following groups has historically had the highest unemployment rate?
a. professional workers
b. white teenagers
c. black teenagers
d. black adults
e. white adults
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Unemployment in Various Groups
43. Since World War II, the average duration of unemployment in the U.S.
a. increased
b. decreased
c. has shown no change
d. decreased until 1972, then increased down to the present
e. decreased until 1984, then increased down to the present
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Unemployment in Various Groups
44. Government fiscal policies that attempt to stimulate aggregate demand are often aimed at reducing
cyclical unemployment.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Sources of Unemployment
45. A person whose skills do not match the available job openings is considered frictionally unemployed.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Sources of Unemployment
46. Ginger quits her job as a secretary because she cannot handle the stress. It takes her three weeks of
solid effort to land a job as a receptionist. Over these three weeks, she would be considered frictionally
unemployed.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Sources of Unemployment
47. Most of the unemployment during the Great Depression was cyclical unemployment.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
48. Sharon was being treated unfairly by her boss, so she stormed off the job and two weeks later found
another position. For two weeks Sharon experienced
a. cyclical unemployment
b. structural unemployment
c. seasonal unemployment
d. frictional unemployment
e. being out of the labor force
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Sources of Unemployment
49. Juanita earned a B.S. in engineering and went to work for a defense contractor. When the government
cut spending, Juanita and 99 others were laid off. The only other business in the town is growing
grapes, but the growers refuse to hire laid-off engineers, knowing they will leave at the first
opportunity. The unemployment Juanita is experiencing is
a. cyclical
b. structural
c. seasonal
d. frictional
e. voluntary
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Sources of Unemployment
50. The only job Justin ever holds is preparing income tax forms at H&R Block from January 2 to April
15. In March, while he is still working, he sends his resume to prospective employers. In March, he
was counted as
a. cyclically unemployed
b. structurally unemployed
c. frictionally unemployed
d. part of the labor force
e. out of the labor force
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Sources of Unemployment
51. Your cousin recently graduated from Harvard Law School and has not found a job after looking for
one last week. She can be described as
a. frictionally unemployed
b. structurally unemployed
c. seasonally unemployed
d. not part of the labor force
e. a discouraged worker
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Sources of Unemployment
52. The type of unemployment most likely to be experienced by a touring professional golfer is
a. frictional unemployment
b. structural unemployment
c. seasonal unemployment
d. cyclical unemployment
e. discouraged-worker unemployment
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Sources of Unemployment
53. Frictional unemployment refers to unemployment that results from
a. a mismatch of skills
b. being in the wrong geographical location
c. taking the time to find the best job
d. seasonal decreases in demand for labor
e. a recession in the economy
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
54. Seasonal unemployment refers to unemployment that results from
a. a mismatch of skills
b. being in the wrong geographical location
c. taking the time to find the best job
d. seasonal decreases in demand for labor
e. a recession in the economy
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
55. Structural unemployment refers to unemployment that results from
a. inefficiencies in the market for labor that prolong the job search
b.
c.
d.
e.
being in the wrong geographical location
taking the time to find the best job
seasonal decreases in demand for labor
a recession in the economy
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
56. Cyclical unemployment results from
a. a mismatch of skills
b. being in the wrong geographical location
c. taking the time to find the best job
d. seasonal decreases in demand for labor
e. a recession in the economy
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
57. Jacqueline, a brilliant new Ph.D. in economics, has turned down many job offers because she hopes
eventually to teach at one of the top ten universities in her field. The type of unemployment she is
experiencing is
a. frictional
b. structural
c. seasonal
d. cyclical
e. underemployment
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Sources of Unemployment
58. Jamal lost his job as a shipbuilder during 2004. His shipyard never reopened, and so his very
specialized skills are no longer in demand. Jamal's unemployment is best classified as
a. cyclical
b. structural
c. seasonal
d. frictional
e. voluntary
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Sources of Unemployment
59. In which of the following industries are workers least likely to suffer from cyclical unemployment?
a. new home construction
b. automobile manufacturing
c. carpet installation
d. education
e. tourism
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Sources of Unemployment
60. Most of the unemployment experienced in the United States during the Great Depression was
a. cyclical
b. structural
c. seasonal
d. frictional
e. voluntary
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
61. Which of the following types of unemployment is the hardest to reduce?
a. cyclical
b. structural
c. voluntary
d. involuntary
e. speculative
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: Sources of Unemployment
62. Which type of unemployment is most likely to help the economy become more efficient?
a. cyclical
b. structural
c. seasonal
d. frictional
e. underemployment
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Sources of Unemployment
63. The impact of __________ unemployment is removed from official unemployment figures that are
reported monthly.
a. cyclical
b. structural
c. seasonal
d. frictional
e. involuntary
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
64. Unemployment arising from mismatch of skills is called
a. frictional unemployment
b. structural unemployment
c. seasonal unemployment
d. cyclical unemployment
e. underemployment
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
65. Structural unemployment results from
a. a mismatch of skills
b. the availability of unemployment insurance
c. monetary cost and the time it takes to find the best job
d. seasonal decreases in demand for labor
e. prolonged declines in business activity
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
66. Cyclical unemployment results from
a. a mismatch of skills
b. being in the wrong geographical location
c. monetary cost and the time it takes to find the best job
d. seasonal decreases in demand for labor
e. prolonged declines in business activity
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
67. If the official unemployment rate increases in August from its July level, we can conclude that
__________ unemployment is responsible for the increase.
a. seasonal
b. cyclical
c. structural
d. frictional
e. any of the causes of
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Sources of Unemployment
68. If the official unemployment rate increases in January from its December level because the Christmas
season is over, we can conclude that __________ unemployment is responsible for the increase.
a. seasonal
b. cyclical
c. structural
d. frictional
e. any one of the causes of
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Sources of Unemployment
69. If the official unemployment rate increases in March from its February level because of sluggish sales
in the auto industry, we can conclude that __________ unemployment is responsible for the increase.
a. seasonal
b. cyclical
c. structural
d. frictional
e. any one of the causes of
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Sources of Unemployment
70. Which type of unemployment is experienced by a person who is laid off at an office because new
technology reduces the need to handle customer service inquiries?
a. seasonal
b. cyclical
c. voluntary
d. structural
e. frictional
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Sources of Unemployment
71. Seasonal unemployment results from
a. unrealistic expectations about the availability of employment
b. being in the wrong geographical location
c. taking the time to find the best job
d. decreases in demand for labor at certain times of the year
e. periodic increases in business activity
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
72. Which of the following is most likely to reduce structural unemployment?
a. a reduction in wage rates
b. increasing efficiency of the job search through better information on local job openings
c. retraining workers in marketable skills
d. promotion of full employment through government stabilization policies
e. reducing the cost of job loss through enhanced unemployment compensation
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Sources of Unemployment
73. Workers who are temporarily unemployed but who normally find jobs quickly are called
a. frictionally unemployed
b. cyclically unemployed
c. seasonally unemployed
d. structurally unemployed
e. discouraged workers
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Sources of Unemployment
74. Which type of unemployment is likely to increase the most in a recession?
a. frictional unemployment
b. seasonal unemployment
c. structural unemployment
d. cyclical unemployment
e. employment
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Sources of Unemployment
75. Which of the following statements about unemployment is true?
a. There is only one kind of unemployment.
b. Some unemployment exists even when the economy is healthy and growing.
c. Unemployment and inflation are not related.
d. People who are willing and able to work but have given up the search for a job are
considered unemployed.
e. Voluntary unemployment refers to a situation in which people who really do not want to
work only pretend to look for jobs.
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: The Meaning of Full Employment
76. The best example of a frictionally unemployed worker is one who
a. reduces productivity by causing frictions in a business
b. is laid off during a recessionary period in the economy
c. is in the process of voluntarily switching jobs
d. is discouraged and not actively seeking work
e. cannot find a job that matches with his skills
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: The Meaning of Full Employment
77. When the economy is at full employment, what types of unemployment may exist?
a. none
b. structural and frictional
c. seasonal and cyclical
d. frictional, cyclical, and structural
e. cyclical
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: The Meaning of Full Employment
78. Full employment
a. exists when everyone in the economy has a job
b. exists when everyone who wants a job has one
c. exists when the unemployment rate is zero
d. exists when everyone in the labor force has a job
e. will always include some unemployment
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: The Meaning of Full Employment
79. Which of the following is not consistent with full employment?
a. an unemployment rate of 5 percent or 6 percent
b. seasonal unemployment
c. structural unemployment
d. cyclical unemployment
e. frictional unemployment
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: The Meaning of Full Employment
80. Full employment is considered a major economic goal because
a. specialization is not possible without full employment
b. economic growth can only occur when there is full employment
c. the opportunity cost of unemployment is lost production
d. comparative advantage is not possible without full employment
e. inflation will be lower when full employment is achieved
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: The Meaning of Full Employment
81. An increase in unemployment benefits is likely to do which of the following?
a. reduce a person's incentive to look for work
b. reduce the opportunity cost of being unemployed
c. provide a better safety net for employed families
d. make it more difficult for people to search longer for jobs appropriate to their skill levels
e. increase the need to accept the first job available after becoming unemployed
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Unemployment Compensation
82. Which of the following will most likely qualify for unemployment compensation benefits?
a. a new college graduate who cannot find work despite a desperate job search
b. an unemployed coal miner who has been receiving benefits for the past six months
c. a former retail clerk who quit her job because the boss was too demanding
d. a spot welder who has just gotten his first "pink slip" in the mail after ten years of
continuous employment
e. an accountant who was fired from his last position for drinking alcohol on the job
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Unemployment Compensation
83. It is difficult to compare unemployment rates across countries because methods of measuring
unemployment are not standardized.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: International Comparisons of Unemployment
84. If a new Ph.D. in philosophy finds work as a taxi driver, but continues to look for a college teaching
position, he is counted as being employed.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Problems with Official Unemployment Figures
85. The official unemployment rate disguises the extent of the unemployment problem because
a. children are not counted as unemployed
b. retired persons are not counted as unemployed
c. full-time students are not counted as unemployed
d. discouraged workers are counted as unemployed
e. people overqualified for their current job are not considered unemployed
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Problems with Official Unemployment Figures
86. Exclusion of which of the following tends to understate the true extent of unemployment in the
economy?
a. children
b. retired persons
c. students
d. people who do not want to work
e. discouraged workers
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Problems with Official Unemployment Figures
87. Assuming the total population is 150 million, the labor force is 100 million, and 94 million workers are
employed, the unemployment rate is
a. 4 percent
b. 8 percent
c. 6 percent
d. 10 percent
e. 15 percent
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Problems with Official Unemployment Figures
88. Underemployment refers to
a. seasonal unemployment
b. people working full-time though they would rather work part-time
c. the unemployment that occurs when the actual level of employment is less than the full
employment level
d. people working in jobs that do not fully use their skills
e. people working part-time
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Problems with Official Unemployment Figures
89. The unemployment rate does not measure all of the "unemployment problem." Which of the following
groups is not counted as unemployed in the official unemployment statistics?
a. the underemployed and the cyclically unemployed
b. the underemployed and the discouraged workers
c. the discouraged workers and the frictionally unemployed
d. the frictionally unemployed and the structurally unemployed
e. the cyclically unemployed and the frictionally unemployed
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Problems with Official Unemployment Figures
90. The official unemployment rate would be higher if it included the existence of hidden unemployment
or individuals who are
a. on unemployment compensation
b. not working
c. working part-time but prefer full-time work
d. voluntarily retired
e. unemployed and looking for work
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Problems with Official Unemployment Figures
91. Which of the following factors makes the official unemployment rate an overstatement of the actual
level of unemployment in the economy?
a. exclusion of discouraged workers
b. inclusion of those only working part-time
c. inclusion of those who are overqualified for their current jobs
d. exclusion of those who work at a family business
e. inclusion of those who pretend to look for work in order to qualify for welfare programs
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: Problems with Official Unemployment Figures
92. Because of the way discouraged workers and part-time employment are measured, the official
unemployment rate
a. overstates the unemployment problem
b. understates the unemployment problem
c. truly reflects the level of unemployment
d. overstates the size of the labor force
e. understates the size of the labor force
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Problems with Official Unemployment Figures
93. If the price level increases by 2 percent each year, the inflation rate is increasing.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
TOP: Inflation
NAT: Reflective Thinking
94. Inflation is defined as a sustained increase in the price level.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
TOP: Inflation
NAT: Analytic
95. A sustained decrease in the price level is known as deflation.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
TOP: Inflation
NAT: Analytic
96. Inflation is
a. a reduction in everyone's standard of living
b. a rise in the real prices of all goods and services
c. a general and continuing rise in the money prices of goods and services
d. a continuing rise in everyone's standard of living
e. an increase in the value of money compared to the value of goods
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
TOP: Inflation
NAT: Analytic
97. If the inflation rate is higher than expected, which of the following groups in society would be most
likely to gain?
a. borrowers
b. lenders
c. persons holding large amounts of money
d. persons on fixed incomes
e. workers under contract without a cost of living adjustment
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
TOP: Inflation
NAT: Reflective Thinking
98. The view that union wage demands may be a source of inflation would be best associated with the
a. supply shock view of inflation
b. demand pull view of inflation
c. cost push view of inflation
d. demand push view of inflation
e. monetary view of inflation
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
TOP: Inflation
NAT: Reflective Thinking
99. During periods of high inflation, people want to hold as much money as possible.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: A Historical Look at Inflation and the Price Level
100. Hyperinflation refers to a period of extremely erratic inflation rates.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
TOP: Inflation
NAT: Reflective Thinking
101. During the late 1960’s the inflation experienced in the United States as a result of the spending on the
Vietnam War is referred to as
a. hyperinflation
b. demand-pull inflation
c. wartime inflation
d. cost-push inflation
e. cyclical inflation
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Two Sources of Inflation
102. During the 1970’s the inflation experienced in the United States as a result of OPEC oil price increases
is referred to as
a. demand-pull inflation
b. hyperinflation
c. cost-push inflation
d. cyclical inflation
e. temporary inflation
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Two Sources of Inflation
103. Demand-pull inflation is worse for an economy than cost-push inflation because in addition to higher
prices, demand-pull inflation also reduces employment.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Two Sources of Inflation
104. Deflation refers to
a. decreasing relative prices
b. a decreasing price level
c. a slowing down of the rate of inflation
d. a slowing down of the rate of relative price decreases
e. a federal government policy of running budget surpluses
ANS: B
PTS: 1
LOC: Unemployment and inflation
105. Hyperinflation refers to a situation in which
DIF: Moderate
TOP: Inflation
NAT: Analytic
a.
b.
c.
d.
e.
prices are rising extremely rapidly
prices are falling extremely rapidly
the price level is extremely high
the price level is extremely low
the price level is negative
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
TOP: Inflation
NAT: Analytic
106. Anticipated inflation causes more problems in the economy than unanticipated inflation.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Anticipated versus Unanticipated Inflation
107. The nominal interest rate is equal to the real interest rate minus the anticipated inflation rate.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
108. Inflation is the hardest on those living on fixed incomes.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Why is Inflation Unpopular?
109. The misery index is the sum of the unemployment rate and the inflation rate.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
TOP: Final Word
NAT: Analytic
110. Joel just graduated from college and is looking for a job. Economists would classify Joel as
a. cyclically unemployed
b. structurally unemployed
c. seasonally unemployed
d. frictionally unemployed
e. out of the labor force
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Sources of Unemployment
111. Inflation can only be caused by an increase in aggregate demand.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Two Sources of Inflation
112. If the aggregate demand curve shifts rightward,
a. the price level increases and output decreases
b.
c.
d.
e.
the resulting increase in the price level is usually called cost-push inflation
the resulting increase in the price level is usually called demand-pull inflation
the price level increases only if there is also a leftward shift of the aggregate supply curve
the price level decreases and output decreases
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Two Sources of Inflation
113. If the aggregate supply curve shifts leftward,
a. the price level increases and output increases
b. the resulting increase in the price level is usually called cost-push inflation
c. the resulting increase in the price level is usually called demand-pull inflation
d. the price level increases only if there is also a rightward shift of the aggregate demand
curve
e. the price level decreases and output increases
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Two Sources of Inflation
114. Inflation can be caused by
a. increases in aggregate demand only
b. increases in aggregate supply only
c. decreases in aggregate supply only
d. increases in aggregate supply or decreases in aggregate demand
e. increases in aggregate demand or decreases in aggregate supply
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Two Sources of Inflation
115. Which of the following would lead to the most inflation?
a. Both aggregate demand and aggregate supply increase.
b. Both aggregate demand and aggregate supply decrease.
c. Aggregate demand increases and aggregate supply decreases.
d. Aggregate demand increases and aggregate supply increases.
e. Aggregate supply decreases.
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Two Sources of Inflation
116. The difference between demand-pull inflation and cost-push inflation is that
a. demand-pull inflation is caused by movements of the aggregate supply curve; cost-push
inflation is caused by changes in firms' costs of production
b. cost-push inflation is caused by movements of the aggregate demand curve; demand-pull
inflation is caused by cyclical activity in the economy
c. demand-pull inflation is caused by movements of the aggregate demand curve; cost-push
inflation is caused by movements of the aggregate supply curve
d. demand-pull inflation is caused by government deficit spending; cost-push inflation is
caused by firms
e. demand-pull inflation is caused by foreign demand; cost-push inflation is caused by
domestic production problems
ANS: C
PTS: 1
LOC: Unemployment and inflation
NARRBEGIN: Exhibit 21-1
DIF: Hard
NAT: Reflective Thinking
TOP: Two Sources of Inflation
Exhibit 7-1
NARREND
117. The inflation illustrated in Exhibit 7-1 would be considered:
a. cost-pull inflation
b. cost-push inflation
c. demand-push inflation
d. demand-pull inflation
e. induced inflation
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Two Sources of Inflation
118. Demand-pull inflation is associated with
a. decreasing aggregate demand and lower unemployment
b. increasing aggregate demand and lower unemployment
c. decreasing aggregate demand and greater unemployment
d. increasing aggregate demand and greater unemployment
e. a rising price level caused by a shift in either aggregate demand or aggregate supply
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Two Sources of Inflation
119. Which is true of cost-push inflation?
a. It occurs when the aggregate demand curve shifts rightward.
b. It occurs when the aggregate supply curve shifts rightward.
c. It results in a decrease in the unemployment rate.
d. It results in a movement along the aggregate demand curve.
e. It is caused by the same factors that lead to demand-pull inflation.
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: Two Sources of Inflation
120. What was the result of increased oil prices during the 1970s?
a. Aggregate demand decreased, causing cost-push inflation.
b. Aggregate demand increased, causing demand-pull inflation.
c. Aggregate supply increased, causing demand-pull inflation.
d. Aggregate supply increased, causing cost-push inflation.
e. Aggregate supply decreased, causing cost-push inflation.
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Two Sources of Inflation
121. Demand-pull inflation is caused by an
a. inward shift of the aggregate demand curve
b. inward shift of the aggregate supply curve
c. outward shift of the aggregate supply and demand curves
d. outward shift of the aggregate demand curve
e. outward shift of the aggregate supply curve
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: Two Sources of Inflation
122. Cost-push inflation is typically caused by an
a. inward shift of the demand curve
b. inward shift of the aggregate supply and demand curves
c. outward shift of the demand curve
d. outward shift of the supply curve
e. inward shift of the supply curve
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Two Sources of Inflation
123. If the CPI in 2003 was 150 and the CPI in 2004 was 160, the inflation rate over the year was 10
percent.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: A Historical Look at Inflation and the Price Level
124. If the CPI is 200, then the price level has doubled since the base year.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: A Historical Look at Inflation and the Price Level
125. Demand-pull inflation is typically caused by rapidly rising costs of production.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: A Historical Look at Inflation and the Price Level
126. Which period in U.S. economic history was not characterized by inflation?
a. 1917-1920
b. 1929-1933
c. 1947
d. 1978-1980
e. 1980-1989
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: A Historical Look at Inflation and the Price Level
127. Which of the following is true about U.S. history prior to 1945?
a.
b.
c.
d.
e.
The inflation rate remained constant during this period.
Cost-push inflation led to depressions, followed by slowly-rising price levels.
The price level remained constant during this period.
Major wars resulted in high inflation rates, after which the inflation rate tapered off.
Major wars resulted in high inflation rates that were usually followed by deflation.
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: A Historical Look at Inflation and the Price Level
128. During which of the following decades was the U.S. inflation rate highest?
a. 1920s
b. 1930s
c. 1950s
d. 1970s
e. 1980s
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: A Historical Look at Inflation and the Price Level
129. In the United States,
a. the average inflation rate was higher before 1950 than after
b. the average inflation rate was higher after 1950 than before
c. inflation caused no serious problems before World War II
d. inflation caused no serious problems after World War II
e. the implicit price deflator was used to measure inflation before World War II, and the
consumer price index has been used since then.
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: A Historical Look at Inflation and the Price Level
130. Since the end of World War II, the U.S. price level has
a. increased eightfold
b. increased by an average of 10 percent each year
c. increased and decreased with equal regularity, leaving the price level almost constant
d. increased by 50 percent
e. doubled
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: A Historical Look at Inflation and the Price Level
131. Suppose the price levels in four successive years are 100, 120, 133, and 140. Which of the following is
true?
a. The economy is experiencing hyperinflation.
b. The economy is experiencing deflation.
c. The economy is experiencing inflation.
d. The economy is experiencing increasing inflation.
e. The economy is experiencing reflation.
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: A Historical Look at Inflation and the Price Level
132. A worker would be hurt least by inflation when the
a. worker anticipates inflation and increases savings at the bank
b. worker is protected by a cost-of-living adjustment clause in an employment contract
c. the price level increases but at a decreasing rate
d. worker is protected by fixed annual increases in wages and benefits it an employment
contract
e. government increases the level of social security retirement benefits to correct for the
effects of unanticipated inflation
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: A Historical Look at Inflation and the Price Level
133. Since World War II, the Consumer Price Index has increased by an average of
a. 1.4% per year
b. 2.1% per year
c. 6.4% per year
d. 5.6% per year
e. 3.9% per year
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: A Historical Look at Inflation and the Price Level
134. If nominal wages increase 7 percent while the price level rises by 5 percent, real wages rise.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Anticipated versus Unanticipated Inflation
135. Anticipated inflation distorts markets more than does unanticipated inflation.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: Anticipated versus Unanticipated Inflation
136. Suppose you received a 3 percent increase in your nominal wage. Over the year, inflation ran about 6
percent. Which of the following is true?
a. Your real wage fell.
b. Your nominal wage fell.
c. Both your nominal and real wages decreased.
d. Although your nominal wage fell, your real wage increased.
e. Both nominal and real wages increased.
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Anticipated versus Unanticipated Inflation
137. Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2
percent. Which of the following is true?
a. Your real wage fell.
b. Your nominal wage fell.
c. Both your nominal and real wages decreased.
d. Although your nominal wage fell, your real wage increased.
e. Both your nominal and real wages increased.
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Anticipated versus Unanticipated Inflation
138. Suppose you received a 5 percent increase in your nominal wage. Over the year, inflation ran about 2
percent. Which of the following is true?
a.
b.
c.
d.
e.
Your real wage increased.
Your nominal wage decreased.
Both your nominal and real wages decreased.
Although your nominal wage fell, your real wage increased.
Although your nominal wage rose, your real wage decreased.
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Anticipated versus Unanticipated Inflation
139. Suppose you received a 4 percent increase in your nominal wage. Over the year, inflation runs about 7
percent. Which of the following is true?
a. Your real wage increased.
b. Both the nominal and real wages increased.
c. Both your nominal and real wages decreased.
d. Although your nominal wage fell, your real wage increased.
e. Although your nominal wage rose, your real wage decreased.
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Anticipated versus Unanticipated Inflation
140. A decrease in a person's real wage necessarily means
a. lower purchasing power
b. a lower nominal wage
c. a lower nominal wage after payment of taxes
d. a higher nominal wage
e. a higher nominal wage after payment of taxes
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Anticipated versus Unanticipated Inflation
141. An increase in a person's real wage necessarily means
a. greater purchasing power
b. a lower nominal wage
c. a lower nominal wage after payment of taxes
d. a higher nominal wage
e. a higher nominal wage after payment of taxes
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Anticipated versus Unanticipated Inflation
142. Anticipated inflation
a. allows us to eliminate the problems associated with unemployment
b. causes more problems than unanticipated inflation
c. causes fewer problems than unanticipated inflation
d. is easy to predict for economists
e. prevents workers from increasing their purchasing power
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Anticipated versus Unanticipated Inflation
143. If the inflation rate is 5 percent and you receive a wage increase of 5 percent,
a. your nominal income declines but your real income increases
b. both your nominal income and your real income increase by 5 percent
c. your nominal income increases but your real income declines
d. both your nominal income and your real income decrease by 5 percent
e. your nominal income increases by 5 percent but your real income is unchanged
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Anticipated versus Unanticipated Inflation
144. The higher you think the inflation rate is likely to be,
a. the higher the nominal interest rate you will offer as a borrower and want as a lender
b. the higher the nominal interest rate you will offer as a borrower, and the lower the rate you
will want as a lender
c. the lower the nominal interest rate you will offer as a borrower and want as a lender
d. the higher the real interest rate you will want as a lender
e. the higher the real interest rate you will offer as a borrower
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Anticipated versus Unanticipated Inflation
145. If the expected inflation rate is 4 percent and the nominal interest rate is 9 percent, the expected real
interest rate is
a. 13 percent
b. -5 percent
c. 9 percent
d. -13 percent
e. 5 percent
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Anticipated versus Unanticipated Inflation
146. The higher the anticipated inflation rate,
a. the more workers will ask for in wages, and the more firms will agree to pay
b. the more workers will ask for in wages, and the less firms will agree to pay
c. the less workers will ask for in wages, and the less firms will agree to pay
d. the higher the real wage increases offered by firms
e. the higher the real wage increases asked for by workers
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Anticipated versus Unanticipated Inflation
147. During periods when the inflation rate fluctuates widely,
a. all relative prices increase at the same rate, leaving money prices constant
b. all money prices rise at the same rate, causing relative prices to increase
c. economic efficiency increases because decision makers pay closer attention to changes in
money prices
d. uncertainty about changes in relative prices causes a decrease in economic efficiency
e. all money prices increase at the same rate, leaving relative prices constant
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Anticipated versus Unanticipated Inflation
148. If future price changes were perfectly anticipated by both borrowers and lenders, what would happen
to the real interest rate in the future if the price level changed?
a. it would increase
b. it would decrease
c. it would decrease by the amount of the price increase
d. it would increase by the amount of the price increase
e. it would not change
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Anticipated versus Unanticipated Inflation
149. In periods of high inflation,
a. people want to hold as much money as possible
b. the purchasing power of money is decreasing
c. nobody wants to work and earn income
d. low nominal interest rates are likely to result
e. nobody wants to buy goods and services
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: The Transaction Costs of Variable Inflation
150. Which of the following is true about inflation?
a. Inflation promotes social harmony by uniting people against the government.
b. Inflation is more damaging if it is unanticipated.
c. Accurate anticipation of inflation is possible for everyone who is well informed about
economic events.
d. Those who lend money at a rate above the rate of inflation suffer economic losses.
e. If people accurately anticipate inflation, their actions will prevent it.
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: The Transaction Costs of Variable Inflation
151. Some economists have argued that inflation during the 1970s contributed to the U.S. economy's
relatively slow growth rate. What is the basis for this view?
a. Inflation usually lowers employment, thus slowing growth.
b. If inflation is anticipated, it is particularly harmful because cost of living increases are
built into wage settlements, which only worsens the problem.
c. High and variable inflation rates increased uncertainty, thus making business decisions
more difficult.
d. Lenders were less interested in making short-term loans than in making long-term loans.
e. Inflation during the 1970s created increased activity on Wall Street, which drew funds that
could have been used for truly productive purposes.
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: The Transaction Costs of Variable Inflation
152. During inflationary times, which of the following is unlikely to happen?
a. People change their expectations about the inflation rate.
b. Workers try to get increases in nominal wages.
c. People are willing to lend money for longer periods.
d. Relative price changes become harder to recognize.
e. People buy physical assets as a hedge against rising prices.
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: The Transaction Costs of Variable Inflation
153. Uncertainty about inflation
a. shifts the attention of business managers away from exchange rate movements and toward
concerns about productivity
b. reduces the difficulty of making international business decisions
c. creates uncertainty about the value of the dollar relative to foreign currencies
d. enhances money's importance as a link between the present and the future
e. makes contracts easier to negotiate
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: The Transaction Costs of Variable Inflation
154. Relative prices describe the terms at which individual goods are exchanged for one another.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: Inflation Obscures Relative Price Changes
155. During periods of inflation, all prices increase.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Inflation Obscures Relative Price Changes
156. In times of rapid inflation,
a. money loses its use as a store of value
b. money becomes an attractive store of wealth
c. people postpone purchases as long as possible
d. people spend less in transactions costs
e. people tend to save more money
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation Obscures Relative Price Changes
157. Unanticipated inflation penalizes
a. those who are saving
b. those who are borrowing
c. governments
d. those who are in high growth industries where wages are growing faster than prices
e. those who can't find jobs at any wage rate
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation Obscures Relative Price Changes
158. The problems that inflation creates for society are caused primarily by
a. greed on the part of sellers
b. uncertainty regarding the rate at which different prices are increasing or will increase
c. too much incentive to lend money
d. greed on the part of union leaders
e. governments' actions to reduce the effects of inflation
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation Obscures Relative Price Changes
159. The Consumer Price Index measures the cost of
a. all goods and services produced in the U.S. economy
b. all goods produced in the U.S. economy
c. a fixed market basket of consumer goods and services produced in the U.S. economy
d. a fixed market basket of producer goods and services
e. food and energy in the U.S. economy
ANS: C
PTS: 1
DIF: Moderate
NAT: Analytic
LOC: Unemployment and inflation
TOP: Inflation Obscures Relative Price Changes
160. The real interest rate can be negative.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
161. Unanticipated inflation generally hurts borrowers and benefits lenders.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
162. If the expected inflation rate is high, the nominal interest rate will be low.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Inflation and Interest Rates
163. An increase in the interest rate will increase the demand for loanable funds.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
164. An increase in the demand for loanable funds, other things constant, will increase the interest rate.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
165. If Dave loans funds at 2 percent while the inflation rate is 4 percent, his real rate of interest is -2
percent.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Inflation and Interest Rates
166. An increase in the supply of loanable funds, other things constant, will increase the interest rate.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
167. The supply of loanable funds curve slopes downward to the right.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
168. The nominal interest rate is determined in the market for loanable funds.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
169. In periods of high inflation,
a. people want to hold as much money as possible
b. the purchasing power of money is increasing
c. nobody wants to work and earn income
d. high nominal interest rates are likely to result
e. nobody wants to buy goods
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Inflation and Interest Rates
170. Which of the following is true about inflation?
a. Inflation promotes social harmony by uniting people against the government.
b. Inflation is more damaging if it is anticipated than if it is not anticipated.
c. Accurate anticipation of inflation is possible for everyone who is well informed about
economic events.
d. Those who have loaned money at an interest rate below the rate of inflation suffer
economic losses.
e. If people anticipate inflation, their actions will prevent the inflation.
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Inflation and Interest Rates
171. Which of the following is true about inflation?
a. Inflation promotes social harmony by uniting people against the government.
b. Inflation is more damaging if it is anticipated than if it is not anticipated.
c. Accurate anticipation of inflation is possible for everyone who is well informed about
economic events.
d. Those who have borrowed money at an interest rate below the rate of inflation will
generally benefit.
e. If people anticipate inflation, their actions will prevent the inflation.
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Inflation and Interest Rates
172. If the nominal interest rate is 5 percent and there is no inflation,
a. the real interest rate exceeds 5 percent
b. the real interest rate is less than 5 percent
c. the real interest rate is 5 percent
d. there is not enough information to determine the real interest rate
e. the real interest rate is zero
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Inflation and Interest Rates
173. If the nominal interest rate is 6 percent and the inflation rate is 4 percent,
a.
b.
c.
d.
e.
the real interest rate is 10 percent
the real interest rate is 2 percent
the real interest rate is -2 percent
the real interest rate is -10 percent
there is insufficient information to determine the real rate of interest
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Reflective Thinking
TOP: Inflation and Interest Rates
174. If two parties to a loan contract agree that the lender should earn an 8 percent increase in purchasing
power as a result of a loan, and the inflation rate is 5 percent, what is the nominal interest rate?
a. 13 percent
b. 8 percent
c. 5 percent
d. 3 percent
e. 1 percent
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Inflation and Interest Rates
175. An increase in the interest rate, other things constant, will
a. shift the supply of loanable funds curve to the left
b. shift the supply of loanable funds curve to the right
c. increase the quantity of loanable funds supplied
d. shift the demand for loanable funds curve to the left
e. increase the quantity of loanable funds demanded
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
176. A decrease in the interest rate, other things constant, will
a. shift the supply of loanable funds curve to the left
b. shift the supply of loanable funds curve to the right
c. decrease the quantity of loanable funds demanded
d. decrease the quantity of loanable funds supplied
e. shift the demand for loanable funds curve to the right
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
177. A decrease in the interest rate, other things constant, will
a. shift the demand for loanable funds curve to the right
b. shift the demand for loanable funds curve to the left
c. increase the quantity of loanable funds demanded
d. increase the quantity of loanable funds supplied
e. shift the supply of loanable funds curve to the right
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
178. An increase in the interest rate, other things constant, will
a. shift the demand for loanable funds curve to the right
b. shift the demand for loanable funds curve to the left
c. decrease the quantity of loanable funds supplied
d. decrease the quantity of loanable funds demanded
e. shift the supply of loanable funds curve to the right
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Inflation and Interest Rates
179. If people suddenly become more willing to lend money, what happens to the equilibrium rate of
interest?
a. An increase in demand for loanable funds will increase the interest rate.
b. An increase in the supply of loanable funds will increase the interest rate.
c. An increase in the supply of loanable funds will decrease the interest rate.
d. An increase in demand for loanable funds will decrease the interest rate.
e. A simultaneous increase in both the supply of and demand for loanable funds makes it
impossible to predict what will happen to the rate of interest.
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Inflation and Interest Rates
180. Unanticipated inflation redistributes income across groups in society. Among the winners are
a. those who loan money
b. those on fixed incomes
c. small savers
d. those who borrow at fixed interest rates
e. those who hold large amounts of cash
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Inflation and Interest Rates
181. Raul borrowed $1,000 from Marta for a year and agreed to repay her $1,050 at the end of the year. If
the inflation rate was 3 percent, what is the real rate of interest Marta received?
a. 10 percent
b. 5 percent
c. 3 percent
d. 2 percent
e. -2 percent
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Inflation and Interest Rates
182. Tony lent Dave $1,000 for one year with the understanding that Dave would repay $1,070. If the
actual inflation rate was 7 percent, what was the real rate of interest Tony received?
a. 14 percent
b. 7 percent
c. 4 percent
d. 0 percent
e. -7 percent
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Inflation and Interest Rates
183. Which of the following events would most likely cause the nominal interest rate to fall?
a. The supply of loanable funds decreases.
b. Both the supply of and the demand for loanable funds increase.
c. Both the supply of and the demand for loanable funds decrease.
d. The supply of loanable funds increases and the demand for loanable funds decreases.
e. The supply of loanable funds decreases and the demand for loanable funds increases.
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Inflation and Interest Rates
184. The real interest rate can be expressed as the
a. nominal interest rate minus the real interest rate
b. inflation rate minus the nominal interest rate
c. nominal interest rate minus the inflation rate
d. inflation rate minus the real interest rate
e. nominal interest rate plus the inflation rate
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Inflation and Interest Rates
185. During periods of inflation, the real value (purchasing power) of a given amount of nominal dollars
decreases.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Analytic
TOP: Why is Inflation Unpopular?
186. Inflation
a. always reduces real income
b. never reduces real income
c. reduces the real income of workers when wages increase more than prices do
d. reduces the real income of workers when wages increase less than prices do
e. increases the real income of workers only when wages increase less than prices do
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Why is Inflation Unpopular?
187. Which of the following people is least likely to be hurt by inflation?
a. a salesperson who works on commission
b. a retired couple living on a pension
c. an individual who works under a labor contract calling for a fixed wage for the next three
years
d. an individual who contracts to lend money for a fixed rate of interest for the next three
years
e. an individual working at the minimum wage (which seldom changes)
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Why is Inflation Unpopular?
188. Unanticipated inflation creates problems for society because
a. it increases the wealth of people who hold cash
b. it promotes social cooperation by encouraging self-restraint
c. it reduces the desire to plan and reduces the complexity of planning
d. it redistributes wealth and income
e. it requires buyers to spend less time acquiring information about prices
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Why is Inflation Unpopular?
189. Unanticipated inflation is usually viewed as undesirable because it
a. reduces everyone's nominal wages
b.
c.
d.
e.
redistributes income and wealth
is accompanied by reductions in real GDP
usually results in the public sector growing less rapidly than the private sector
lets lenders gain at the expense of borrowers
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: Why is Inflation Unpopular?
190. In April of 2010, the US economy added 290,000 jobs but the unemployment rate still rose from 9.7%
to 9.9%. Which of the following best explains how this can happen?
a. the size of the labor force shrunk
b. the number of unemployed workers also rose but by a smaller percentage
c. the number of illegal immigrants rose substantially
d. it was a mistake
e. the number of unemployed workers also rose but by an even greater percentage
ANS: E
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Measuring Unemployment
191. The labor force participation rate climbs with education.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Labor Force Participation Rate
192. Unemployment rates __________ during contractions and __________ during expansions.
a. rise, fall
b. fall, fall
c. rise, stay the same
d. stay the same, fall
e. fall, rise
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Unemployment Over Time
193. The unemployment rate trended down from the early 1980s to 2000 because there were fewer people
in the workforce like
a. Juan, age 28
b. Chien, age 38
c. Billy, age 18
d. Daniel, age 48
e. Gregory, age 58
ANS: C
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Unemployment Over Time
194. An occupation with a high unemployment rate is
a. professionals in general
b. attorneys
c. technical workers in general
d. auto workers
e. Web page designers
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Unemployment Varies Across Occupations and Regions
195. Construction workers at times face high rates of unemployment because their work is both seasonal
and subject to wide swings over the business cycle.
a. True
b. False
ANS: A
PTS: 1
DIF: Easy
LOC: Unemployment and inflation
TOP: Unemployment Varies Across Occupations and Regions
NAT: Analytic
196. The metropolitan with the lowest unemployment rate is
a. Detroit
b. Atlanta
c. San Diego
d. Honolulu
e. Portland
ANS: D
PTS: 1
DIF: Easy
LOC: Unemployment and inflation
TOP: Unemployment Varies Across Occupations and Regions
NAT: Analytic
197. An example of structural unemployment caused by a change in tastes and preferences is
a. newspaper journalists
b. administrative assistants
c. lifeguards
d. steelworkers during recessions
e. None of the answers is correct
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Reflective Thinking
TOP: Sources of Unemployment
198. Full employment is when the unemployment rate is zero.
a. True
b. False
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: The Meaning of Full Employment
199. Inflation rates differ across regions mostly because of differences in housing prices.
a. True
b. False
ANS: A
PTS: 1
LOC: Unemployment and inflation
DIF: Easy
NAT: Analytic
TOP: Inflation Across Metropolitan Areas
200. Since 1980, a country that has experienced deflation is
a. the U.S.
b. France
c. Germany
d. Japan
e. Italy
ANS: D
PTS: 1
LOC: Unemployment and inflation
DIF: Moderate
NAT: Analytic
TOP: International Comparisons of Inflation
NARRBEGIN: Exhibit 21-2
Exhibit 7-2
NARREND
201. The inflation illustrated in Exhibit 7-2 would be considered:
a. cost-pull inflation
b. cost-push inflation
c. demand-push inflation
d. demand-pull inflation
e. induced inflation
ANS: B
PTS: 1
LOC: Unemployment and inflation
DIF: Hard
NAT: Reflective Thinking
TOP: Two Sources of Inflation