Chapter 12 Unemployment and Inflation

| November 9, 2018

3)
Recall the application. If you are unemployed and if your peer group is also
unemployed,
A)
you have a better chance of finding employment.
B)
you may not be as aggressive in searching for work.
C)
you will want to find a job quickly to encourage your peer group about
employment prospects.
D)
you have little chance of finding a job.

4)
Unemployment insurance typically replaces a worker’s full earnings.

5)
Unemployment insurance tends to lead to the unemployed worker spending less
time unemployed.

12.4 The Consumer Price Index and the Cost of
Living

1)
The value of a dollar
A)
is its purchasing power.
B)
remains constant over time.
C)
is its face value.
D)
is set by the government.

2)
The real-nominal principle can be stated as
A)
production generates income.
B)
only final goods and services should be counted in GDP.
C)
what matters to people is the purchasing power of money or income.
D)
only the manufacture of real goods is production.

3)
The index most widely used by the government and the private sector to measure
changes in the cost of living is the
A)
Producer Price Index.
B)
Consumer Price Index.
C)
the GDP deflator.
D)
the chain-weighted price index.

4)
The Consumer Price Index (CPI) relies on the calculation of
A)
prices of a fixed basket of goods that does not change often.
B)
prices of a variable basket of goods that changes frequently.
C)
the components of GDP that change annually.
D)
the components of GDP that do not change frequently.

5)
Which one of the following statements is true of the Consumer Price Index?
A)
It does not take account of the price of imported goods and services.
B)
It measures changes in prices of a fixed basket of goods.
C)
It does not take into account the price of used goods.
D)
It understates the true rate of inflation.

The
following table lists the basket of goods in the
Consumer
Price Index for the nation of Astro (Assume 2010 is the base year.)

2010 Quantity

2010 Price

2011 Quantity

2011 Price

2012 Quantity

2012 Price

Sunglasses

8

$9.00

10

$11.00

7

$10.00

Toothpaste

15

3.00

18

4.00

15

4.00

Ferrets

6

12.00

4

15.00

9

18.00

Table
12.2

6)
Using the information in Table 12.2, the Astro Consumer Price Index for 2010 is
A)
24.
B)
100.
C)
124.
D)
189.

7)
Using the information in Table 12.2, the Astro Consumer Price Index for 2011 is
A)
87.
B)
99.
C)
126.
D)
238.

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