48. A country's current unemployment rate is 5 percent. Economists estimate that its natural rate of unemployment is 5 percent. You can conclude that this economy is currently operating____________ and its actual real GDP Y is ____________ than the potential real GDP Y*.

A) Above its PPF; greater. B) Below its PPF; less

C) Along its PPF; equal to. D) Along its PPF; greater

49. Frictional unemployment often occurs when:

A) the economy enters a recession.

B) people first enter the labor force.

C) people are discriminated against.

D) people lose a job because their skills become obsolete.

50. The automation of an assembly line is likely to result in:

A) structural unemployment. C) cyclical unemployment.

B) frictional unemployment. D) seasonal unemployment

51. Suppose the demand for advertising drops as the result of a recession and that as a result, a graphic arts firm is forced to lay off some of its artists. What type of unemployment best describes the artists' situation?

A) Cyclical unemployment. C)Structural unemployment.

B) Full unemployment. D) Frictional unemployment

52. Workers at a steel plant are laid off because the steel plant is inefficient and very expensive to operate. What type of unemployment best describes the workers' situation?

A) Cyclical unemployment. C) Structural unemployment.

B) Full employment. D) Frictional unemployment

53. Cyclical unemployment is produced by:

A) a slowdown in economic activity.

B) economic restructuring.

C) the institutional structure of the economy.

D) an increase in the number of people entering the labor force.

54. According to the following scenarios: a) Tim just graduated and is looking for a job; b) a recession causes a local factory to lay off 30 workers; c) thousands of bus and truck drivers permanently lose their job when driverless vehicles make human drivers redundant; d) hundreds of New York legal jobs permanently disappear when a lot of legal work gets outsourced to lawyers in India. Scenario a represents ______________unemployment, while scenario d _________________unemployment.

A) frictional; structural B) structural; cyclical

C) cyclical; structural D) frictional; technological

55. The unemployment rate would be higher if:

A) members of the armed services were included in the labor force.

B) discouraged workers were classified as unemployed.

C) underemployed workers were considered employed.

D) marginally attached workers were not considered as part of the labor force.

56. Which of the following people would notbe considered unemployed?

A) A construction worker laid off because of a slowdown in home building.

B) A person who has given up trying to find a job after an unsuccessful search.

C) An executive who quit one job but is still looking for another.

D) A recent college graduate who has not yet found a job.

57. Full employment is said to exist when:

a. no one is unemployed, the unemployment rate is zero,

b. there is only some cyclical unemployment,

c. there is some frictional and structural unemployment,

d. there is no structural and frictional unemployment.

58. If the rate of unemployment equals the natural rate of unemployment or target rate of unemployment,

then ______________, and the economy operates ____________ its PPF.

A) actual output exceeds potential output; above

B) potential output equals actual output; along.

C) real output equals nominal output; along.

D) real output exceeds nominal output; below.

59. If the official unemployment rate in the economy were 9.8%, then the real unemployment rate

would be______, it follows that the real unemployment rate is usually ______________

the official unemployment rate, and it shows some ______________ unemployment in the

economy.

A)9.8%; equal to; cyclical unemployment B) 4.4%; lower than; frictional and hidden

C) 19.6%; higher than; hidden D) about 12.4%; higher than; structural and hidden

60. The unemployment that cannot be avoided by the use of macroeconomic policy is:

A) frictional B) structural C) structural and frictional D) cyclical

61. The level of real GDP (output) that would materialize at the target rate of unemployment (NRU) is called:

A) nominal output. B) actual output. C)potential output. D) utilized output.

Year	1	2	3
Unemployment rate U	8%	6%	7%

62. Refer to the table above. Given the data on actual unemployment rate U and assuming the natural rate of unemployment NRU 6 percent, in year _________ the economy operated at full employment ______________ and produced the real GDP ______ the potential Real GDP; the output gap was_

A) year 1; above; 2% b) in year 2, equal to; 0% c) in year 3; below; -3% d) year 1; above; 4%

63. Refer to the table above. Given the data on actual unemployment rate U and assuming the natural rate of unemployment NRU 6 percent, the output gap in year 1 was_______, while the output gap in year 3 was _________.

a) positive 2%; positive 1% b) negative 4%; negative 2%

c) negative 2%; positive 1% d) positive 4%; negative 6.5%

64. CPI is used to measure:

a. the size of GDP,

b. the relationship between labor and output produced,

c. the price level in economy,

d. the responsiveness of quantity demanded to the change in price.

65. Which of the following price indexes comes closest to measuring the cost of living of the typical household.

a. GDP deflator b. PPI c. CPI d. Household Price Index.

66. In constructing the CPI, it is assumed that:

A) the quantity of the goods purchased remained constant between the base year and the year in question.

B) both the prices and the quantities of the goods purchased remained constant between the base year and the year in question.

C) neither the prices nor the quantities of the goods purchased remained constant between the base year and the year in question.

D) the prices of the goods purchased remained constant between the base year and the year in question

67. If 2000 is the base year, then the price index in that year:

A) is always greater than 100.

B) is always equal to 100.

C) is always less than 100.

D) cannot be determined without more information.

68. The GDP deflator gives the average rate of change in the prices of all:

A) raw materials. C) consumer goods.

B)intermediate goods. D)final goods and services

69. Suppose you are a senator writing a bill to index Social Security and federal pensions. That is, your bill will adjust these benefits to offset changes in the cost of living. Will you use:

A) the GDP Deflator B) the CPI C) the PPI D) Household Price Index.

Year	Consumer Basket Cost
2005	$425
2006	$445
2007	$475

70. Refer to the table above and assume year 2005 as base-year. The CPI in year 2006 was _________,

in 2007 the CPI was ___________; and the consumer price inflation rate in 2007 was ___________ ., the

cost of living in 2007 _________________ compared to the base year.

A) 445; 106; 6.7%; increased by 6% B) 115; 11.3%; decreased by 15

C) 100; 106; 9.3%, increased by 9.3% D) 104.70; 111.76; 6.3%; increased by 11.76%