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1. ECO 405 Week 10 Quiz – Strayer
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Quiz 9 Chapter 13
Unemployment And Inflation: Can We Find A Balance?
Multiple Choice Questions
1. A Person Is Considered Unemployed If The Person Is
A. Seeking A Job Requiring Greater Qualifications Than The Person Possesses And
No One Is Willing To Hire The Person For Such A Job
B. Offered A Job For Which The Person Is Qualified But Prefers Not To Work
C. Qualified For A Job, Willing To Work, But Unable To Find Work For Over 30
Days
D. Out Of School During Christmas Vacation And Cannot Find Work During That
Period
E. All Of The Above
2. Which Of The Following People Is Considered Unemployed?
A. A Truck Driver With A High School Education Who Has Been Laid Off His Job
And Is Now Training To Be A Computer Programmer
B. An Individual Who Is Currently Not Working Nor Actively Seeking Employment
C. A Secretary Who Is Currently Not Working And Who Seeks Employment Using
Secretarial Skills
D. All Of The Above
E. None Of The Above
3. An Auto Factory Worker Who Is Unemployed Because A Robot Now Has His Job
Is A Victim Of
A. Structural Unemployment
B. Cyclical Unemployment
C. Underemployment
D. Frictional Unemployment
E. Seasonal Unemployment

2. 4. Which Of The Following Individuals Is Considered Part Of The Labor Force?
A. An Unemployed Farmer
B. A College Graduate Looking For His First Job
C. A Retired Teacher Working As A Sales Clerk
D. A Department Store Santa During December
E. All Of The Above
5. When Individuals Want To Work, But Give Up Looking For A Job Because They
Feel There Will Never Be One Available, They Are Considered
A. Pessimistic
B. Lazy
C. Discouraged
D. Part Of The Labor Force
E. Unemployed
6. Which Of The Following Individuals Is Part Of The Labor Force?
A. A 15-Year-Old Worker At A Fast Food Restaurant
B. A Paid Prison Worker At The Prison Carpentry Shop
C. A College Student Attending School Full-Time
D. A Stay-At-Home Dad
E. None Of The Above
7. The Unemployment Rate
A. For Blacks Is Roughly Twice The Rate For Whites
B. For Women Is Lower Than That Of Men
C. For Teenagers Is Below The Rate For The Labor Force As A Whole
D. Is Equal For Males And Females, Blacks And Whites, And Young And Old
Workers
E. Is None Of The Above
8. Technological Change In An Industry That Historically Required Specific Labor
Skills Will Lead To
A. Frictional Unemployment
B. Structural Unemployment
C. Cyclical Unemployment
D. Seasonal Unemployment
E. No Changes In Unemployment

3. 9. People Who Are In The Process Of Changing Jobs Are Classified In The Category
Of
A. Frictional Unemployment
B. Involuntary Unemployment
C. Structural Unemployment
D. Cyclical Unemployment
E. Seasonal Unemployment
10. A College Graduate Looking For Her First Job Is Considered
A. Frictionally Unemployed
B. Involuntarily Unemployed
C. Structurally Unemployed
D. Cyclically Unemployed
E. Seasonally Unemployed
11. A Farmer Who Has Lost His Farm Due To Increased Agricultural Productivity Is
Considered
A. Frictionally Unemployed
B. Involuntarily Unemployed
C. Structurally Unemployed
D. Cyclically Unemployed
E. Seasonally Unemployed
12. A Factory Worker Who Loses A Job Because Of A Decrease In Aggregate
Demand Is
A. Frictionally Unemployed
B. Involuntarily Unemployed
C. Structurally Unemployed
D. Cyclically Unemployed
E. Seasonally Unemployed

4. 13. The Full-Employment Unemployment Rate Is
A. 0
B. Inconsistent With Price Stability
C. The Rate That Reflects Cyclical Unemployment
D. 10%
E. None Of The Above
14. Between 1960 And 2011, The Unemployment Rate Has
A. Steadily Increased
B. Steadily Fallen
C. Been Below 6% Over The Entire Period
D. Ranged From 1% To 12%
E. None Of The Above
15. Unemployment Rates Tend To Rise When
A. Inflation Rates Rise
B. Aggregate Demand Is High
C. The Economy Goes Through An Expansion
D. There Is A Recession
E. Interest Rates Are Low
16. A Major Cause Of Involuntary Unemployment Is
A. A Wage Rate Below Equilibrium
B. Not Enough Demand For Labor
C. Too Much Supply Of Labor
D. Laziness
E. A Wage Rate Above Equilibrium
17. The Unemployment Rate Will Not Fall To Zero Because Of
A. Cyclical Unemployment
B. Frictional Unemployment
C. Welfare
D. Voluntary Unemployment
E. All Of The Above

5. 18. Which Of The Following Types Of Unemployment Is Considered Long-Term,
Hardcore Unemployment?
A. Cyclical
B. Structural
C. Frictional
D. Seasonal
E. None Of The Above
19. A Poorly Educated, Unskilled Teenager Currently Unemployed Is An Example
Of
A. Frictional Unemployment
B. Cyclical Unemployment
C. Structural Unemployment
D. Seasonal Unemployment
E. None Of The Above
20. People Who Are Unemployed Due To A Downturn In Economic Activity Are
Classified In The Category Of
A. Frictional Unemployment
B. Structural Unemployment
C. Seasonal Unemployment
D. Cyclical Unemployment
E. Voluntary Unemployment
21. When General Motors Lays Workers Off Because Of A Decrease In Aggregate
Demand, It Causes
A. Cyclical Unemployment
B. Frictional Unemployment
C. Seasonal Unemployment
D. Structural Unemployment
E. None Of The Above

6. 22. Unemployment Below The Full Employment Rate Is A Measure Of
A. Underemployment
B. Structural Unemployment
C. Cyclical Unemployment
D. Seasonal Unemployment
E. None Of The Above
23. The Highest Unemployment Rate Is Found Among
A. People Between The Ages Of 16 And 19
B. Females
C. Ethnic Groups
D. The Elderly
E. Children
24. Which Of The Following Best Describes When The Economy Is Experiencing
Inflation? When
A. The Price Of An Essential Good Increases Dramatically
B. The Prices Of Many Goods Go Up
C. There Is A Rise In The General Level Of Prices
D. All Prices Remain The Same Or Increase; No Prices Fall
E. The Value Of The Dollar Increases
25. Which Price Index Is Also Known As The Cost-Of-Living Index?
A. Consumer Price Index
B. Wholesale Price Index
C. Implicit Price Deflator
D. Gdp Deflator
E. All Of The Above
26. If Inflation Is Not Observable In The Form Of Rising Prices, It Is Called
A. Suppressed
B. Repressed
C. Deflation
D. Dynamic
E. None Of The Above

7. 27. Price Index Numbers For A Series Of Years Show
A. If Money Gdp Is Growing
B. If Real Gdp Is Growing
C. If All Prices Are Rising
D. The Average Price Level For Each Year As A Percentage Of The Base Year
E. None Of The Above
28. If The Consumer Price Index Is 100 In 2010 And Is 120 In 2012, Then The Rate
Of Inflation Between 2010 And 2012 Is
A. 10%
B. 20%
C. 15%
D. 5%
E. Unable To Be Calculated Without Further Information
29. The Best Description Of The Growth Of The Money Supply Since 1960 Is That It
Has
A. Increased Steadily
B. Increased Rapidly During The 1980's
C. Decreased Steadily
D. Decreased Rapidly During The 1960's
E. Shown Patterns Of Both Fast And Slow Growth Over The Decades
30. When Inflation Redistributes Income From One Group In The Economy To
Another, It Is An Example Of Which Effect?
A. Equity
B. Efficiency
C. Output
D. Input
E. None Of The Above
31. If Inflation Causes The Demand For Houses To Increase More Rapidly Than The
Demand For Other Goods, The Economy Has Experienced Which Effect
Of Inflation?
A. Equity
B. Efficiency
C. Output
D. Input
E. None Of The Above

8. 32. If Inflation Stimulates Production And Employment, The Economy Experiences
Which Of The Following Effects Of Inflation?
A. Equity
B. Efficiency
C. Output
D. Input
E. None Of The Above
33. Which Of The Following Is Most Likely Be Hurt By Inflation?
A. People On Fixed Incomes
B. People Whose Wages Rise Faster Than Prices
C. Landholders
D. Borrowers
E. None Of The Above
34. Suppose A Family Spends $20,000 On A Basket Of Goods In 2011. Suppose The
Same Basket Costs $22,000 In 2012. Using 2011 As The Base Year, The Price Index
For 2012 Is
A. 105
B. 102
C. 111
D. 110
E. None Of The Above
35. The Effect Of Inflation On Production And Employment Is Known As
A. An Incomes Policy
B. The Equity Effects Of Inflation
C. The Efficiency Effects Of Inflation
D. The Output Effects Of Inflation
E. Fiscal Policy

9. 36. Federal Income Taxes Are Levied On The Basis Of Nominally Stated Tax
Brackets, And There Is A Nominal Upward Adjustment In Salaries And Wages
During Inflation. Therefore, What Is Of Federal Tax Collections During Inflation?
They Will
A. Decrease In Both Real And Nominal Terms
B. Increase In Both Real And Nominal Terms
C. Increase In Real Terms
D. Increase In Nominal Terms
E. Stay The Same
37. Which Of The Following Statements Is Correct? Inflation
A. Benefits Creditors At The Expense Of Debtors
B. Increases The Purchasing Power Of The Dollar
C. Increases The Real Value Of Savings
D. Arbitrarily "Taxes" Fixed Income Groups
E. Increases Real Wages
38. The Effects Of Inflation On The Distribution Of Income Are Called
A. An Incomes Policy
B. The Equity Effects Of Inflation
C. The Efficiency Effects Of Inflation
D. The Output Effects Of Inflation
E. None Of The Above
39. The Effect That Inflation Has On The Allocation Of Resources Is Known As
A. An Incomes Policy
B. The Equity Effects Of Inflation
C. The Efficiency Effects Of Inflation
D. The Output Effects Of Inflation
E. None Of The Above

10. 40. In The Circular Flow Diagram, Economic Units Are Classified As
A. Imports And Exports
B. Households And Producers
C. Taxpayers And Governments
D. Subsidy Receivers And Taxpayers
E. Producers And Sellers
41. The Circular Flow Of Economic Activity Developed In The Text Is A Model Of
The
A. Flow Of Goods, Resources, Payments And Expenditures Between The Sectors Of
The Economy
B. Influence Of Government On Business Behavior
C. Influence Of Business On Consumers
D. Role Of Unions And Government In The Economy
E. Interaction Among Taxes, Prices, And Profits
42. Which Of The Following Statements Concerning The Circular Flow Is ?
A. The Circular Flow Of Economic Activity Shows How The Overall Economy
Operates
B. The Circular Flow Emphasizes The Independence Of Economic Variables
C. There Are Two Circular Flows Involved In The Economy
D. The Circular Flow Shows That Real Income Is Determined By Physical Goods
And Services Produced In The Economy
E. None Of The Above
43. Aggregate Demand
A. Represents The Sum Of The Demands By All Purchasers Of Goods And Services
In An Economy
B. Is Comprised Of The Purchases Of Goods And Services Only By Consumers
C. Excludes Imports And Exports
D. Assumes That Governments Do Not Purchase Goods And Services
E. None Of The Above
44. The Aggregate Demand Curve Will Shift To The Right
A. When The Government Raises Taxes
B. If Investors Reduce Their Purchases Of Plant And Equipment
C. If Consumer Confidence Increases
D. If Prices Fall
E. None Of The Above
45. The Marginal Propensity To Consume Is
A. Consumption Divided By Income
B. The Change In Consumption
C. The Change In Consumption Divided By The Change In Income
D. Unaffected By Changes In Income
E. All Of The Above

11. 46. The Marginal Propensity To Consume Plus The Marginal Propensity To Save
A. Represents What Happens As A Result Of Income Changes
B. Must Always Sum To 1
C. Must Always Sum To 0
D. A And B
E. None Of The Above
47. Investment Spending Is Sensitive To
A. Interest Rates
B. Expectations By Producers About The Return On Investment
C. The Confidence Of Investors
D. All Of The Above
E. None Of The Above
48. A Trade Deficit Will Occur In An Economy
A. When Spending Exceeds Income
B. When The Value Of Exports Exceeds The Value Of Imports
C. When The Value Of Exports Is Less Than The Value Of Imports
D. When An Economy Is Expanding
E. When An Economy Is In Recession
49. Assuming A Marginal Propensity To Consume Three-Fourths, The Spending
Multiplier Is
A. 1
B. 2
C. 3
D. 4
E. None Of The Above
50. Assume That The Spending Multiplier Is 3. The Government Has Decided To
Purchase New Computers To Improve Productivity And Will Spend $50 Billion On
The Computer Equipment. The Resulting Increase In National Income Will Be
A. Zero
B. $200 Billion
C. $100 Billion
D. $150 Billion
E. It Cannot Be Determined

12. 51. The Determinants Of Aggregate Supply Are
A. Resources, Prices, And Technology
B. Interest Rates
C. Consumer Wealth
D. Real Income
E. All Of The Above
52. Ameeta Spends $400 When Her Income Is $500. When She Receives A $100
Raise (Bringing Her Total Income To $600), She Spends $480. Her Mpc Is
A. 0.4
B. 0.5
C. 0.6
D. 0.8
E. 1.0
53. The Psychological Law Of Consumption Tells Us The Marginal Propensity To
Consume Will Be
A. Less Than 0
B. Greater Than 0 But Less Than 1
C. Equal To 1
D. Greater Than 1 But Less Than 10
E. Greater Than 10
54. If The Mpc Is 0.8, The Spending Multiplier Equals
A. 0.2
B. 0.8
C. 1.25
D. 5.0
E. 8.0
55. If The Mps Is .4, The Spending Multiplier Equals
A. 0.4
B. 0.6
C. 1.67
D. 2.5
E. 4.0
56. Which Of The Following Is A Component Of Aggregate Demand?
A. Consumption
B. Investment
C. Government Spending
D. Exports And Imports
E. All Of The Above

13. Questions 57 - 62 Refer To The Graph Below.
57. Given Short Run Aggregate Supply S0, What Level Of Aggregate Demand Is
Necessary For The Economy To Reach Full Employment?
A. Lower Than D1
B. D0
C. D1
D. D2
E. Higher Than D2
58. Given D0 And S0, An Increase In Aggregate Demand Would Lead To Which Of
The Following?
A. Higher Unemployment
B. Lower Unemployment
C. Inflation
D. Deflation
E. Recession

14. 59. Given S1 And D1, Which Of The Following Changes Reduces Unemployment? A
Shift To
A. D0
B. D2
C. S0
D. All Of The Above
E. None Of The Above
60. Which Of The Following Would Cause A Shift From D1 To D2?
A. An Increase In Investment
B. A Decrease In Consumption
C. An Increase In Imports
D. An Increase In Saving
E. All Of The Above
61. Which Of The Following Would Cause A Shift From S1 To S0?
A. A Decrease In Resource Prices
B. An Decrease In Unemployment
C. An Increase In The Price Of Labor
D. An Increase In Consumption
E. All Of The Above
62. Demand-Pull Inflation Is Illustrated By A Movement From
A. S0 To S1
B. S1 To S0
C. D0 To D2
D. D1 To D0
E. Q1 To Q0

15. 63. If The Economy Is Initially At Full Employment, An Increase In Aggregate
Demand Will Result In
A. Demand-Pull Inflation
B. Profit-Push Inflation
C. Cost-Push Inflation
D. Unemployment
E. Underemployment
64. To Expand The Level Of Economic Activity, It Is Necessary That
A. Total Leakages Exceed Total Injections
B. Government Expenditures Exceed Tax Collections
C. Total Injections Exceed Total Leakages
D. Imports Exceed Exports
E. (C) And (D) Above
65. Leakages In The Circular Flow Consist Of
A. Savings, Taxes, And Exports
B. Savings, Investment, And Exports
C. Government Spending, Investment, And Exports
D. Savings, Taxes, And Imports
E. Investment, Taxes, And Imports
66. Injections In The Circular Flow Consist Of
A. Savings, Exports, And Investments
B. Savings, Exports, And Taxes
C. Government Spending, Savings, And Exports
D. Government Spending, Investment, And Exports
E. None Of The Above
67. Aggregate Supply Can Be Increased By
A. Reduced Incentives To Save
B. Higher Taxes
C. Increases In Government Spending
D. Policies To Induce More Saving
E. None Of The Above

16. 68. The Phillips Curve Depicts The Relationship Between
A. Output And Inflation
B. Savings And Investment
C. Unemployment And Inflation
D. Imports And Exports
E. None Of The Above
69. Economists In The 1960s Believed That The Phillips Curve Relationship Would
A. Allow Governments To End Inflation
B. Provide Governments A Means To Control Recessions
C. Discourage Imports
D. Provide Policies That Would Trade Off Unemployment For Inflation
E. None Of The Above
70. Economic Policy Makers In The 1960s Held That Governments Could
A. Engage In Expansionary And Contractionary Policies To Manage The Economy
B. Spend Their Way Out Of Business Cycles
C. Eliminate Unemployment
D. Choose How Much To Produce
E. None Of The Above
71. After The Events Of The 1970s, Economists Learned That
A. Attempts To Trade Off Unemployment And Inflation Would Only Work For A
Short Period Of Time
B. Shocks To The Aggregate Supply Could Alter The Relationships Between
Unemployment And Inflation
C. The Phillips Curve Relationship Was Not Stable
D. The Phillips Curve Shifted Over Time
E. All Of The Above

17. 72. By How Much Must Investment Spending Increase To Increase Output By $500
If The Mpc Is 0.8?
A. $100
B. $300
C. $400
D. $500
E. More Than $500
73. A Useful Measure Of The Size Of The Workforce, That Is, The Number Of
Individuals Who Are Willing And Able To Work, Is
A. The Current Population Survey
B. The Unemployment Rate
C. The Rate Of Job Growth
D. The Labor Force Participation Rate
E. There Are No Useful Measures Of This Information, Due To The Difficulties Of
Gathering The Sample
74. In An Economy Like That Of The Us, Due To A Variety Of Institutional And
Social Factors, Wages Tend To Be
A. Very Flexible
B. Flexible During Recessions
C. Highly Rigid
D. Affected Only By Congressional Legislation
E. Sticky
75. Which Of The Following Factors In An Economy Contribute To “Sticky”
Wages?
A. Flexible Working Conditions
B. Competitive Labor Markets
C. Collective Bargaining Agreements
D. Highly Mobile Capital Equipment
E. Investment Flexibility

18. True / False Questions
76. Unemployment Affects Both The Current And Future Production Of Goods And
Services.
77. If Leakages Exceed Injections, Unemployment Will Result.
78. Involuntary Unemployment Occurs When Wage Rates Are Too Low, I.E., Below
Competitive Levels.
79. Cyclical Unemployment Is Due Primarily To A Decline In Aggregate Supply.
80. Structural Unemployment Results From People Changing Jobs.
81. Frictional Unemployment Refers To Persons Who Are Unemployed Because The
Economy Is In A Recession.
82. As An Economy Approaches Full Employment, Real Output Declines.
83. Frictional Unemployment Is A Long-Run Event For Particular Individuals.

19. 84. The Unemployment Rate Is The Same For All Demographic Groups.
85. Full Employment Means That Everyone In The Labor Force Has A Job.
86. An Equilibrium Level Of National Income Implies The Economy Is Operating At
Full Employment.
87. Frictional Unemployment Is Involuntary.
88. Structural Unemployment Results From The Economy Experiencing A
Recession.
89. Cyclical Unemployment Occurs Because Workers Have No Marketable Job
Skills.
90. A Certain Amount Of Frictional And Structural Unemployment Occurs Even At
Full Employment.
91. Frictional Unemployment Can Be Reduced By Education And Training.

20. 92. An Economy Reaches Full Employment When There Is No Cyclical
Unemployment.
93. Full Employment May Be Reached Even Though There Is Frictional And
Structural Unemployment.
94. Structural Unemployment Is A Long Run Event For Particular Individuals.
95. Frictional Unemployment Could Be Reduced By Decreasing The Minimum
Wage.
96. All Unemployed Workers Are Unemployed For The Same Reason.
97. Cyclical Unemployment Is Involuntary.
98. When Frictional Unemployment Exists, Labor Services Are Voluntarily
Unemployed.
99. As A Group, Women Suffer From The Highest Unemployment Rate.

21. 100. The Lowest Unemployment Rate Is Found For Those Between The Ages Of 16
And 19.
101. Economic Growth Or Improved Technology Would Be Shown On An Aggregate
Demand - Aggregate Supply Diagram As An Increase In Ad, As Remaining
Constant.
102. An Increase In Government Purchases Financed By An Equal Increase In Tax
Collections Will Increase National Income.
103. An Increase In The Marginal Propensity To Consume Will Increase The Size Of
The Multiplier.
104. The Marginal Propensity To Consume Is Usually Greater Than One.
105. An Increase In Trade Deficit Will Increase Unemployment In The U.S.
106. An Increase In The Federal Budget Deficit Will Increase Unemployment.
107. An Increase In Imports Would Expand The Level Of Employment.
108. The Ad-As Relationship Is Not Affected By Circular Flow Relationships.

22. 109. Inflation Means That Prices Are Too High.
110. A Price Index Shows The Absolute Changes In Price That Occur Over Time In
A List Of Different Products And Services.
111. If The Economy Is Operating At A Less-Than-Full Employment Level, An
Increase In Aggregate Demand May Result In An Increase In The Price Level As
Well As An Increase In The Level Of Employment.
112. Inflation May Affect The Distribution Of Income In The Economy And May
Increase National Output.
113. Inflation Is Not Equitable Because It Arbitrarily Changes The Pattern Of Income
Distribution.
114. The Consumer Price Index Is A Cost-Of-Living Index.
115. Demand-Pull Inflation Ends Once Full Employment Is Reached.
116. During Inflation, Some Prices May Be Rising And Some May Be Falling.

23. 117. The Effects Of Inflation On Resource Allocation Are The Equity Effects Of
Inflation.
118. Inflation May Have A Stimulating Effect On Production And Employment.
119. The Labor Force Participation Rate Has Been Steadily Increasing In Recent
Years.
120. Unemployment Rates Since 2007 Have Increased Due To Rising Structural
Unemployment.
121. Since 1960, Inflation Rates Were Highest During The 1970s.
122. When A Phillips Curve Is Drawn, It Shows An Inverse Relationship Between
Inflation And Unemployment Rates.
123. The Phillips Curve Is Another Name For A Production Possibilities Curve.
124. The Phillips Curve Has Displayed A Stable Relationship Between Inflation And
Unemployment Since The 1960s.
125. Expansionary And Contractionary Policies Have Not Proved To Be Effective
Tools To Control Unemployment And Inflation In The American Economy.
126. The Oil Embargo During The Early 1970s Showed How Stable The
Relationship Is Between Unemployment And Inflation Rates.
127. Shifts In The Aggregate Supply Function Can Cause Shifts In The Phillips
Curve.

24. 128. The Relationship Shown By The Phillips Curve, Which Implies A Tradeoff
Between Inflation And Unemployment Rates, Is A Long-Run Phenomenon.