Question

When real GDP grows more slowly than potential GDP,

a.	nominal GDP rises.
b.	the unemployment rate falls.
c.	labor productivity falls.
d.	the unemployment rate rises.

8.   The unemployment rate is the number of unemployed people, expressed as

a.	a ratio of total employed to the population.
b.	a ratio of unemployed to the total employed.
c.	a percentage of the labor force.
d.	a percentage of the population.

9.   If part of the labor force is unemployed, the foregone goods and services are

a.	lost until the unemployed find jobs.
b.	are replaced by unemployment insurance.
c.	are lost forever.
d.	are replaced by an equal amount of imports.

10.   The term frictional unemployment refers to persons who are out of work

a.	due to technological change.
b.	due to strikes or lockouts.
c.	and have given up looking for work.
d.	because they are between jobs.

11.   Richard loses his job at the railroad due to a downturn in general business conditions. He is experiencing

a.	structural unemployment.
b.	cyclical unemployment.
c.	seasonal unemployment.
d.	frictional unemployment.

12.   The reduction of structural unemployment in the United States' economy may require

a.	an increase in the minimum wage.
b.	a reduction in government spending.
c.	an decrease in interest rates.
d.	increased spending on worker retraining.

13.   Unemployment insurance has an important macroeconomic effect because it

a.	props up aggregate supply.
b.	props up aggregate demand.
c.	props up aggregate exports.
d.	helps balance the federal budget.

14.   The nominal interest rate is the sum of the

a.	real interest rate and the historic rate of inflation.
b.	real interest rate and the expected rate of inflation.
c.	historic rate of inflation and the expected rate of inflation.
d.	expected rate of inflation and the rate of price level increase.

15.   The growth rate of potential GDP depends on

a.	the rate of technical progress.
b.	the growth rate of the capital stock.
c.	the growth rate of the labor force.
d.	all of the above.

Answer 1

Q7. When real GDP grows more slowly than the potential GDP, the increase in the number of jobs is less than the potential number of jobs created and as a result the unemployment rate would be higher.

Ans: d. The unemployment rate rises

Q8. Unemployment rate = Number of unemployed/Labor force x 100

Ans: c as a percentage of labor force

Q9. If a part of labor force are unemployed, then the production of goods and services that are forgone due to such unemployment is lost forever, as the loss of production in the past time can't be ever compensated

Ans: c lost forever

Q10. Frictional unemployment arises when the people switch between jobs and are unemployed in the mean time

Ans: d. Because they are between jobs