1. Assume that the Consumer Price Index rises from 80 in one year to 88 in the next year. What is the growth rate of inflation?

a.

10%

b.

20%

c.

12%

d.

6%

2. In an economy, 35 million workers are employed out of a labour force of 50 million and a total population of 70 million. The

unemployment rate is:

a.

15 percent.

b.

25 percent.

c.

30 percent.

d.

50 percent.

3. Which of the following is included in the natural rate of unemployment?

a.

Frictional unemployment only.

b.

Frictional and structural unemployment.

c.

Frictional, structural and cyclical unemployment.

d.

Unsure of the answer.

4. What is the labour force status of a student who is looking for a job following graduation from college?

	a.	She is not officially included in the labour force.
	b.	She is a part of structural unemployment.
	c.	She is part of cyclical unemployment.
	d.	She is part of frictional unemployment.

5. The saving schedule is drawn on the assumption that as income increases:

	a.	saving will decline absolutely and as a percentage of income.
	b.	saving will increase absolutely, but remain constant as a percentage of income.
	c.	saving will increase absolutely, but decline as a percentage of income.
	d.	saving will increase absolutely and as a percentage of income.

6. The 45-degree line on a chart relating consumption and income shows:

	a.	all points where the MPC is constant.
	b.	all points at which saving and income are equal.
	c.	all the points at which consumption and income are equal.
	d.	the amounts households will plan to save at each possible level of income.

7. Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then:

	a.	both lenders and borrowers benefit.
	b.	both lenders and borrowers are hurt.
	c.	borrowers are hurt, but lenders benefit.
	d.	lenders are hurt, but borrowers benefit.

8. What is the definition of the unemployment rate?

	a.	The ratio of unemployed to employed workers.
	b.	The number of employed workersminusthe number of workers who are not in the labour force.
	c.	The percentage of the labour force which is unemployed.
	d.	The percentage of the total population which is unemployed.

9. The GDP deflator or price index equals:

	a.	Gross private domestic investment less the consumption of fixed capital.
	b.	Gross product less income earned in the United States.
	c.	Nominal GDP divided by real GDP.
	d.	Real GDP divided by nominal GDP.

10. If the real GDP per capita in 2004 is $36 000 and in 2005 it is $37 800, what is the economic growth rate?

a.

4.76%

b.

5.00%

c.

$1800

d.

-4.76%

11. How is real GDP per capita measured?

	a.	Nominal GDP multiplied by the population.
	b.	Real GDP divided by the population.
	c.	Real GDP divided by the population and multiplied by 100.
	d.	Real GDP multiplied by the population and divided by 100.

12. A nation has a population of 260 million people. Of these, 60 million are retired, in the military, in institutions, or under 15 years old. There are 188 million who are employed. What is the unemployment rate?

a.

4 percent

b.

6 percent

c.

9 percent

d.

27 percent

13. Assuming inflexible prices, if the demand for many goods and services falls across the entire economy and for an extended period of time:

	a.	Many firms will face a constant reduction in their inventories.
	b.	Many firms will face with an inventory pile up and will be forced to cut production.
	c.	Many firms will face with an inventory pile up and will be forced to hire more workers.
	d.	Many firms will face a constant reduction in their inventories and will be forced to hire more workers.

14. Suppose that a person's nominal income rises from $10,000 to $12,000 and the consumer price index rises from 100 to 105. The person's real income will:

a.

fall by about 20 percent.

b.

fall by about 2 percent.

c.

rise by about 25 percent.

d.

rise by about 15 percent.