Question

1) Which of the following people would be counted as unemployed?

a) None of those

b) A 15 year old actively looking for a summer job

c) A prison immate trying to line up a job after his release

d) A 60 year old who would like a job but hasn't looked for one in the last year

2) Which of the following DOES NOT contribute to the lower rate of structural unemployment in the United States compared to Western Europe?

a) Students enter the labor force earlier on average in the United States

b) More generous unemployment benefits in Western Europe

c) A lower unionization rate in the United States

d) At-will employment in the United States

3) True or False: One shortcoming of the unemployment rate as a measure of inefficiency in the labor market is that it does not take into account that some people who work part time would prefer to work full time.

4) Which of the following could cause growth in the inflation rate?

a) An increase in the growth rate of the velocity of money

b) A decrease in the growth rate of the money supply

c) An increase in the growth rate of real GDP

d) A decrease in the growth rate of average prices

5) Suppose that you wanted to know how increases in coal prices were affecting the steel industry in the United States. Which of the following price indices would be the most helpful in your study?

a) Producer Price Index (PPI)

b) Consumer Price Index (CPI)

c) GDP Deflator

d) Personal Consumption Expenditure Deflator (PCE)

Answer 1

(1) (a)

None of these are counted as unemployment.

(2) (a)

Students entering labor force at an early age will affect labor force and frictional unemployment rate, but not structural unemployment rate.

(3) True

The BLS Official unemployment rate considers part-time workers as employed, therefore it understates actual unemployment rate by not discriminating between part-time and full-time workers.

(4) (a)

As per Quantity theory of money,

M x V = P x Y

% Increase in M + % Increase in V = % Increase in P + % Increase in Y

Therefore, an increase in V will increase price level (inflation).

(5) (a)

PPI reflects the change in price level faced by firms due to increase in input cost.