Week 3 Quiz

An illustrative campus basket holds 10 pizzas, 20 coffees, and 4 textbooks. It costs 200 dollars in the base year. In year 2 a pizza costs 9 dollars, a coffee 3.30, and a textbook 15, so the same basket costs 10 × 9 + 20 × 3.30 + 4 × 15 = 216 dollars. What is the year-2 CPI?

Select one.

• 100
• 105
• 108
• 216

In the same illustrative campus basket, the CPI is 108 in year 2 and 113.4 in year 3. What was the inflation rate from year 2 to year 3?

Select one.

• 5.4%
• 5%
• 13.4%
• 113.4%

Whenever a CPI reads 108, the inflation rate for that year is 8%.

True or false.

• True
• False

A worker receives a 4% raise in a year when prices rise 5%. By the course's shortcut, about how much did the worker's real wage change?

Select one.

• about +9%
• about +1%
• about +4%
• about −1%

An illustrative labor market has 200 million adults, 114 million employed, and 6 million unemployed. What is the unemployment rate?

Select one.

• 3%
• 5%
• 6%
• 60%

In the same illustrative labor market (200 million adults, 114 million employed, 6 million unemployed), what is the labor-force participation rate?

Select one.

• 60%
• 57%
• 40%
• 5%

In an illustrative town, 240 of a 4,800-person labor force are unemployed, a rate of 5%. Then 50 of the unemployed stop looking for work because they believe no jobs are available. What happens to the measured unemployment rate?

Select one.

• It falls to 4% even though no one was hired
• It stays at 5% because the same people are still jobless
• It rises to 6% because the labor force shrank
• It falls to 4% because 50 people found jobs

Which of these illustrative cases are examples of frictional unemployment? Select all that apply.

Select every option that applies.

• A new graduate spending a few weeks choosing among job offers
• A typesetter whose trade was replaced by design software and whose town has no openings needing that skill
• A pharmacist who moved for a partner's job and is interviewing at local pharmacies
• A furniture-store salesperson laid off when a recession cut spending on big purchases
• A switchboard operator replaced by an automated phone system

In its base year, a price index such as the CPI or the GDP deflator equals 100 by definition.

True or false.

• True
• False

Which statement correctly contrasts the GDP deflator with the Consumer Price Index?

Select one.

• The CPI prices everything counted in GDP, while the GDP deflator prices a basket households buy
• Both price the same fixed basket, so the two always move together
• The CPI measures real output, while the GDP deflator measures prices
• The GDP deflator prices everything counted in GDP, while the CPI prices a basket households buy