Multiple Choice Quiz


1	A price index is used in the calculation of
		A)	real gross domestic product.
		B)	inflation.
		C)	unemployment.
		D)	a) and b)


2	The reason it is necessary to measure changes in prices when looking at growth in gross domestic product is that
		A)	some of the increase in gross domestic product is due to inflation.
		B)	unemployment must be taken into account.
		C)	some of the increase in inflation is illusionary.
		D)	some of the increase in gross domestic product is an accounting trick.


3	If the price of beef rises and the price of chicken falls and people eat more chicken and less beef as a result the CPI will
		A)	account for this fact and thereby understate the increase in the cost of living.
		B)	not account for this fact and thereby overstate the increase in the cost of living.
		C)	account for this fact and thereby overstate the increase in the cost of living.
		D)	not account for this fact and thereby understate the increase in the cost of living.


4	Suppose that a new electronic device is introduced at a price of $1500. Suppose by the time that the device enters the BLS market basket its price has fallen to under $100. The result of this is that the CPI will
		A)	account for this fact and thereby understate the increase in the cost of living.
		B)	not account for this fact and thereby overstate the increase in the cost of living.
		C)	account for this fact and thereby overstate the increase in the cost of living.
		D)	not account for this fact and thereby understate the increase in the cost of living.


5	If the CPI increased from 100 to 200 over the span of 10 years then prices have increased _____ over that time
		A)	50%
		B)	100%
		C)	200%
		D)	150%


6	If the CPI increased from 174 to 180 in one year then inflation during that year was
		A)	6% (180-174)
		B)	3.44% (180-174)/174
		C)	3.33% (180-174)/180
		D)	0.96% (174/180)/100


7	In January a Wisconsin construction worker is likely to be
		A)	cyclically unemployed.
		B)	structurally unemployed.
		C)	seasonally unemployed.
		D)	frictionally unemployed.


8	When textile manufacturing left the American south in the 1970s and 1980s to go overseas these workers became
		A)	cyclically unemployed.
		B)	structurally unemployed.
		C)	seasonally unemployed.
		D)	frictionally unemployed.


9	When workers were laid off in the 2001 recession with notice that they would be brought back they were
		A)	cyclically unemployed.
		B)	structurally unemployed.
		C)	seasonally unemployed.
		D)	frictionally unemployed.


10	In the 1990s, workers in the computer industry often would quit their jobs in order to look for better ones in other parts of the country. Prior to finding these new jobs these workers were
		A)	cyclically unemployed.
		B)	structurally unemployed.
		C)	seasonally unemployed.
		D)	frictionally unemployed.


11	If there are 280 million Americans, 120 million who are working and 7 million who are looking for work then the unemployment rate is
		A)	5.5% (7/127).
		B)	5.8% (7/120).
		C)	0.9% (113/120/100).
		D)	2.5% (7/280).


12	The unemployment rate did not increase from September 2001 to October 2001. One explanation was that though there were layoffs, many people who were looking for work prior to September 11, 2001 stopped. This is an example of the
		A)	encouraged worker effect.
		B)	discouraged worker effect.
		C)	seasonal unemployment.
		D)	structural unemployment.


13	If, during a recession, there are people who were laid off from their high-paying jobs and are forced to accept low-paying ones then the unemployment rate will
		A)	not account for this and thereby understate the impact of unemployment.
		B)	account for this and thereby understate the impact of unemployment.
		C)	not account for this and thereby overstate the impact of unemployment.
		D)	account for this and thereby overstate the impact of unemployment.


14	If, during a recession, there are people working fewer hours than they would like the unemployment rate will
		A)	not account for this and thereby understate the impact of unemployment.
		B)	account for this and thereby understate the impact of unemployment.
		C)	not account for this and thereby overstate the impact of unemployment.
		D)	account for this and thereby overstate the impact of unemployment.


15	The real gross domestic product fails to account for
		A)	sales to government.
		B)	sales to businesses.
		C)	Exports.
		D)	unreported cash sales.

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