Homework Sourse1Kevin has lost his job in an automobile plant because of th
1.Kevin has lost his job in an automobile plant because of the use of robots for welding on the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:
a. frictional
b. cyclical
c. seasonal.
d. natural.
e. structural.
2.Find the unemployment rate given the following information about an economy:
Population 120 million
Labor Force 80 million
# Employed 72 million
a. 12.0%.
b. 10.0%.
c. 6.7%.
d. 3.3%.
3. The best example of a \"frictionally unemployed\" worker is one who:
a. is discouraged and not actively seeking work.
b. is unable or unwilling to seek employment.
c. is in the process of voluntarily switching jobs.
d. is laid off during a recessionary period in the economy.
4. Official unemployment rate statistics may:
a. overstate the amount of unemployment by including part-time workers in the labor force calculations.
b. understate the amount of unemployment because of the presence of \"discouraged\" workers who are not actively seeking employment.
c. overstate the amount of unemployment because of the presence of working age adults who are not willing to work.
d. understate the amount of unemployment by excluding part-time workers from the calculations of labor force.
a. an increase in the price of any good or service
b. high overall price level
c. an increase in the value of the dollar over time
d. an increase in the overall price level
6.What happened to the “real” (relative to prices of other goods) price of subway rides between 2002 and 2012?
Price per ride CPI
2002 $2.25 100
2012 $2.25 138
a. did not change
b. Increased
c. decreased
d. can not tell without going on a subway ride
7. If inflation is 9% per year and you receive a 5% raise in income, then your:
a. Real income rises, but nominal income falls.
b. Real income falls, but nominal income rises.
c. Real and nominal income both rise.
d. Real and nominal income both fall.
8. If the nominal interest rate is 18% and the inflation rate is 6%, the real interest rate is:
a. 12%.
b. 24%.
c. 6%.
d. can not be determined
e. 18%.
9.Which of the following individuals will benefit from unanticipated inflation of 10% per year?
a. a retired worker on fixed $30,000 annual income
b. a bank who lent most of its funds to new home owners prior to inflation at nominal interest rate 5%
c. a store manager whose nominal income will grow by 10%
d. a landlord who signed a $1,000/month year lease with tenants prior to inflation
e. a new house owner who signed a mortgage contract prior to inflation at 5% annual nominal interest rate
10.Deflation
a. reduces the real value of cash you keep in your wallet
b. hurts people with fixed income
c. makes it harder for borrowers to repay loans
d. leads to investments into unproductive assets such as antiques, jewelry and foreign currency
Solution
1. The type of unemployment Kevin has to face is structural because it is due to mismatch of skills. Hence the correct answer is (e) i.e structural.
2. Unemployment rate = Unemployed / Labour force = 8 million/ 80 million = 10%. Hence the correct answer is (b) i.e 10%.
3. The best example of a \"frictionally unemployed worker\" is one who is in the process of voluntarily switching jobs. The correct answer is (c).
4. Inflation can be defined as the overall increase in the price level. Hence the correct answer is (d).
5. The real price decreased between 2002 as prices of other goods increased while price of subway rides remained constant. Hence the correct answer is (c).
6. The correct answer is (b) i.e real income falls but nominal income rises. This is because real income change = nominal income change - inflation
7. The correct answer is (a) i.e 12% because real interest rate = nominal interest rate - inflation.
8. Deflation makes it harder for borrower to repay loans. This is because, although the value of money increases, the amount of debt needed to repay is the same. Hence the correct answer is (c).
