Econ 202 Chapter 9 Review

What is the relationship between the unemployment rate and enacting or increasing a minimum​ wage? When a minimum wage is enacted or increased across a​ country, the unemployment rate A. will increase some but the impacts will be much larger for some groups of workers. B. will decrease because workers will have more money which will increase demand and cause firms to hire more workers. C. is not affected because the minimum wage does not affect firm hiring decisions. D. will increase and the impacts will be spread evenly across all groups of workers.

Even perfectly anticipated inflation imposes costs.​ Why? A. Menu costs. B. Paper money loses its purchasing power by the rate of inflation. C. Some wages will fail to keep up with anticipated inflation. D. All of the above. E. A and C only.

the natural rate of unemployment =

Which of the following causes changes in the CPI to overstate the true inflation​ rate? A. New product bias B. Substitution bias C. Increase in quality bias D. All of the above

An efficiency wage is A. a​ below-market wage paid by a firm to maximize firm profits. B. an​ above-market wage paid by a firm to maximize the output of the firm. C. equal to the​ market-clearing wage, so that social welfare is maximized. D. an​ above-market wage paid by a firm to maximize worker productivity.

Which of the following can give an early warning of future increases in the price​ level? A. GDP deflator B. Consumer price index C. Producer price index D. All of the above

What effect do labor unions have on the unemployment​ rate? A. Since few​ non-government workers are​ unionized, there is no significant effect on the unemployment rate. B. By increasing the wage above market​ equilibrium, labor unions considerably increase the unemployment rate. C. By increasing the wage above market​ equilibrium, labor unions considerably decrease the unemployment rate. D. Labor unions can significantly increase the unemployment rate when members go on strike.

Increases in the minimum wage will A. increase unemployment among workers whose market wage is higher than the new minimum wage. B. increase unemployment among teenagers. C. increase the level of unemployment for all groups of workers. D. have a large effect on the unemployment rate in the United States.

Which of the following is a problem of unanticipated​ inflation? A. Redistribution of income from lenders to borrowers B. Decreases in structural unemployment C. Increases in the cost of capital for business investment D. Redistribution of income from borrowers to lenders

If the inflation rate is 6 percent and the nominal interest rate is 4​ percent, then the real interest rate is A. 2​ percent, which is the inflation rate minus the nominal interest rate. B. -2 percent, which is the nominal interest rate minus the inflation rate. C. 10​ percent, which is the sum of the nominal interest rate and the inflation rate. D. 1.5​ percent, which is the ratio of the nominal interest rate to the inflation rate.

The real interest rate =

Inflation can affect the distribution of income because A. people with incomes rising slower than the rate of inflation enjoy an increasing purchasing​ power, while people with incomes rising more quickly than the rate of inflation are hurt by a decreasing purchasing power. B. when inflation is fully​ anticipated, mortgage lenders face very high default risk. C. people with fixed​ incomes, such as retired persons who may be receiving a pension of a fixed number of dollars each​ year, are not affected by the inflation​ rate, but people with varying incomes are. D. people with incomes rising faster than the rate of inflation enjoy an increasing purchasing​ power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power.

How do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment​ rate? A. They are paid as long as the unemployed person remains unemployed. B. They decrease the opportunity cost of job search. C. They increase the opportunity cost of job search. D. The payments are costly and firms are forced to lay off workers.

Which one of the following is not a measure of the price​ level? A. GDP​ Deflator: broadest measure of the average price level as it includes prices of every final good and service. B. Producer Price​ Index: an average of prices received by firms for goods and services at all stages of production. C. Consumer Price​ Index: an average of the prices of goods and services a typical family of four would purchase. D. Government Price​ Index: an average of the prices paid by the government for goods and services used only by different government agencies.

frictional unemployment

structural unemployment

cyclical unemployment

Consumer Price Index (CPI)

Producer Price Index (PPI)

deflation is more dangerous for an economy than inflation (true/false)

unemployment rate =

labor force participation rate

employment population ratio

real average hourly wage year =

CPI =

value today =