2) Which one of the following people would be counted as unemployed in Canada?

A) Veena is not working, but she is looking for a full-time job.

B) Kathy has stopped looking for work since she was unable to find a suitable job during
a one-month search.
C) Sharon is a college student with a job.
D) Christos has been laid off from his job a month ago, and has not been looking for a
new job as he is waiting for a severance package from his former employer.
E) Benoit who was laid off when his firm closed down 2 months ago and has not been
looking for work as he is going back to school.
Answer: A
Diff: 2 Type: MC
Topic: Employment and Unemployment

9) Who of the following would be counted as unemployed in Canada?

A) Doris only works five hours a week but is looking for a full-time job.
B) Kanhaya has stopped looking for work since he was unable to find a suitable job
during a two-month search.
C) Sharon is a college student with no job.
D) Maurice has been laid off from his job for 20 weeks but expects to be called back
soon.
E) Bogdan has been laid off from his job but does not expect to be called back, and is not
looking.
Answer: D
Diff: 2 Type: MC
Topic: Employment and Unemployment
Source: Study Guide

12) In a country with a working-age population of 20 million, 13 million are employed,

1.5 million are unemployed, and 1 million of the employed are working part-time, half of
whom wish to work full-time. The size of the labour force is
A) 20 million.
B) 15.5 million.
C) 14.5 million.
D) 13 million.
E) 11.5 million.
Answer: C
Diff: 2 Type: MC
Topic: Employment and Unemployment
Source: Study Guide

15) In a country with a working-age population of 22 million, 16 million are employed, 2

million are unemployed, and 1 million of the employed are working part-time, half of
whom wish to work full-time. The employment-to-population ratio is
A) 72.7 percent.
B) 65 percent.
C) 75.5 percent.
D) 57.5 percent.
E) none of the above.
Answer: A
Diff: 2 Type: MC
Topic: Employment and Unemployment

22) Which of the following reflects an increase in unemployment?

A) an increase in the employment-to-population ratio
B) a decrease in the unemployment rate
C) an increase in the labour force participation rate
D) an increase in the involuntary part-time rate
E) none of the above
Answer: E
Diff: 2 Type: MC
Topic: Employment and Unemployment

29) Since 1960, Canadian labour force participation rate has ________ and the
unemployment rate has ________.
A) trended higher; trended higher
B) trended lower; varied over the business cycle
C) varied over the business cycle; trended higher
D) trended higher; varied over the business cycle
E) trended higher; trended lower
Answer: D
Type: MC
Topic: Employment and Unemployment
Skill: Recognition
AACSB: Reflective Thinking

30) If the people who take early retirement are not counted in the working-agepopulation,
then
A) the unemployment rate would be lower.
B) the labour force participation rate would be less.
C) the unemployment rate would be higher.
D) the labour force participation rate would be higher.
E) none of the above.
Answer: D
Type: MC
Topic: Employment and Unemployment
Skill: Conceptual
AACSB: Reflective Thinking

31) If the labour force participation rate is rising and the working-age population is not
changing, then the
A) size of the labour force is rising.
B) number of unemployed people is rising and the size of the labour force is falling.
C) size of the labour force is falling.
D) number of unemployed people is falling and the size of the labour force is rising.
E) number of employed people must be increasing.
Answer: A
Type: MC
Topic: Employment and Unemployment
Skill: Analytical

34) Which of the following is NOT included in the working-age population?

A) discouraged workers
B) involuntary part-time workers
C) retired workers
D) students over the age of 15
E) All of the above are included in the working-age population.
Answer: E
Type: MC

4) Unemployment caused by permanently decreased demand for horse-drawn carriages is

an example of
A) cyclical unemployment.
B) seasonal unemployment.
C) frictional unemployment.
D) structural unemployment.
E) discouraged unemployment.
Answer: D
Diff: 2 Type: MC
Topic: Unemployment and Full Employment
Source: Study Guide

5) Which one of the following people is cyclically unemployed?

A) a Saskatchewan welder who lost her job when her company relocated to B. C. and is
currently looking for a job
B) a Nova Scotia fishery worker who is searching for a better job closer to home
C) a steel worker who is laid off but who expects to be called back soon
D) an office worker who has lost her job because of a general slowdown in economic
activity
E) none of the above
Answer: D
Diff: 2 Type: MC
Topic: Unemployment and Full Employment
Source: Study Guide
6) Which one of the following people is frictionally unemployed? A steel worker who
A) loses her job because of technological change.
B) is laid off but expects to be called back soon.
C) gives up her job because she retires.
D) decides to leave the labour force and become a full-time ballet student.
E) becomes discouraged and stops looking for a job.
Answer: B
Diff: 2 Type: MC
Topic: Unemployment and Full Employment

18) In a dynamic economy under ideal conditions, the unemployment rate

A) should be zero.
B) is greater than zero percent due to natural unemployment.
C) increases as the price level rises.
D) decreases as the price level falls.
E) averages 6 percent.
Answer: B
Diff: 2 Type: MC
Topic: Unemployment and Full Employment

19) If the economy is operating at full employment, then

A) everyone who wants a job has one.
B) the entire labour force is employed.
C) the unemployment rate is approximately 3 percent.
D) the unemployment rate is zero.
E) none of the above.
Answer: E
Diff: 1 Type: MC
Topic: Unemployment and Full Employment

20) Jesse just graduated from university, and is looking for her first job. Jesse is
A) frictionally unemployed.
B) structurally unemployed.
C) not unemployed.
D) cyclically unemployed.
E) not in the labour force.
Answer: A
Diff: 2 Type: MC
Topic: Unemployment and Full Employment

21) Caitlin is working part-time at the Mr. G store, but wants to work full-time. She is
A) frictionally unemployed.
B) structurally unemployed.
C) not in the labour force.
D) cyclically unemployed.
E) none of the above.
Answer: E
Diff: 2 Type: MC
Topic: Unemployment and Full Employment

25) People become unemployed when they

A) retire.
B) are on maternity leave.
C) quit working to go to university.
D) leave university and start seeking work.
E) all of the above.
Answer: D
Diff: 1 Type: MC
Topic: Unemployment and Full Employment

28) If the number of discouraged workers increases, everything else remaining the same,
then the
A) unemployment rate will increase.
B) employment-to-population ratio will decrease.
C) labour force participation rate will increase.
D) labour force participation rate will decrease.
E) employment-to-population ratio will increase.
Answer: D
Diff: 2 Type: MC
Topic: Unemployment and Full Employment
Source: Study Guide

29) If the number of discouraged workers decreases because many of them start to look
for work, everything else remaining the same, then the
A) unemployment rate will increase.
B) employment-to-population ratio will decrease.
C) labour force participation rate will increase.
D) labour force participation rate will decrease.
E) both A and C.
Answer: E
Diff: 2 Type: MC
Topic: Unemployment and Full Employment

31) Suppose that the natural unemployment rate is 4.5 percent and the actual
unemployment rate is 3.5 percent. Then cyclical unemployment is
A) 1 percent.
B) -1 percent.
C) 8 percent.
D) 0 percent. ASK ALSO
E) 3.5 percent.
Answer: B
Type: MC
Topic: Unemployment and Full Employment
Skill: Analytical
AACSB: Reflective Thinking

36) Some unemployment is unavoidable because ________.

A) people are making transitions through the stages of life and businesses are making
transitions
B) many part-time workers would like to have full-time work
C) often people become discouraged workers
D) many people in the working-age population attend school and are unemployed
E) there is always some cyclical unemployment
Answer: A
Type: MC
Topic: Unemployment and Full Employment
Skill: Recognition
Source: MyEconLab
AACSB: Reflective Thinking

37) The official unemployment rate might underestimate the underutilization of labour
resources for all of the following reasons except ________.
A) it excludes part-time workers who want full-time jobs
B) it excludes discouraged workers
C) it excludes marginally attached workers
D) it excludes people who are waiting to be called back to jobs from which they have
been laid off
E) the official unemployment rate excludes all of the above
Answer: D
Type: MC
Topic: Unemployment and Full Employment
Skill: Recognition
Source: MyEconLab
AACSB: Reflective Thinking

38) The unemployment rate is supposed to measure ________. It is an imperfect measure

because ________.
A) the number of unemployed plus the number of marginally attached workers expressed
as a percentage of the labour force; it excludes the marginally attached workers because
Statistics Canada considers them as employed
B) the percentage of the working-age population who are unemployed; it is impossible to
count everyone in the working-age population
C) the percentage of the labour force who are unemployed; it is impossible to count
everyone in the labour force
D) the underutilization of labour resources; it excludes some underutilized labour and
some unemployment is unavoidable
E) the underutilization of labour resources; it includes part-time workers and excludes
discouraged workers
Answer: D
Type: MC
Topic: Unemployment and Full Employment
Skill: Recognition
Source: MyEconLab

Use the table below to answer the following questions.

Table 21.3.1
Suppose a simple economy produces three goods only.
The price and output data for some selected years are shown below.

Price Price Quantity Quantity

(dollars) (dollars) (number) (number)
2002 2012 2002 2012
Pop 0.75 1.10 100 120
Crackers 1.25 2.10 300 280
Cucumbers 2.00 3.00 200 190

10) Refer to Table 21.3.1. The reference base period is 2002. The CPI in 2012 is
A) 1,340.
B) 158.
C) 100.
D) 96.
E) 63.
Answer: B
Diff: 3 Type: MC
Topic: The Price Level and Inflation

11) Refer to Table 21.3.1. The reference base period is 2002. Which one of the following
statements is true?
A) From 2002 to 2012, the cost of the market basket rose by 58 percent.
B) It costs 158 times more in 2012 than it does in 2002 to buy the same market basket.
C) All prices have risen by the same amount.
D) The inflation rate in 2012 is greater than the inflation rate in 2002.
E) The inflation rate in 2002 is greater than the inflation rate in 2012.
Answer: A
Diff: 3 Type: MC
Topic: The Price Level and Inflation
12) Refer to Table 21.3.1. The reference base period is 2002. the CPI in 2002 is
A) 1,340.
B) 158.
C) 100.
D) 96.
E) 63.
Answer: C
Diff: 2 Type: MC
Topic: The Price Level and Inflation

13) Refer to Table 21.3.1. The reference base period is 2008. The CPI in 2002 is
A) 100.
B) 157.
C) 129. ASK THIS
D) 63.
E) 152.
Answer: D
Diff: 3 Type: MC
Topic: The Price Level and Inflation

14) Refer to Table 21.3.1. The reference base period is 2012. The CPI in 2012 is
A) 100.
B) 157.
C) 129.
D) 64.
E) 153.
Answer: A
Diff: 2 Type: MC
Topic: The Price Level and Inflation

15) If the CPI in 2008 was 100 and the CPI in 2006 was 115, then the inflation rate in
2006 is
A) 1.5 percent.
B) 100 percent.
C) 11.5 percent.
D) 115 percent.
E) none of the above.
Answer: E
Diff: 2 Type: MC
Topic: The Price Level and Inflation

16) The fixed basket of Econoland consists of 10 units of A, 20 units of B, and 30 units of
C. Current prices are $1 per unit of A, $2 per unit of B, and $3 per unit of C. Base year
prices are $1 for each unit of A, B, and C. What is the CPI in the current year?
A) 43
B) 100
C) 233
D) 430
E) 140
Answer: C
Diff: 3 Type: MC
Topic: The Price Level and Inflation

18) The technique used to calculate the CPI implicitly assumes that consumers buy
A) relatively more of goods with relative prices that are increasing.
B) relatively less of goods with relative prices that are decreasing.
C) the same relative quantities of goods as in a base year.
D) goods and services whose quality improves at the rate of growth of real GDP.
E) more computers and CD players and fewer black-and-white TVs.
Answer: C
Diff: 2 Type: MC
Topic: The Price Level and Inflation
Source: Study Guide

21) If prices at Wendy's rise, more consumers buy their meals at McDonald's and fewer
consumers buy their meals at Wendy's. This is an example of
A) consumers' action to boycott Wendy's.
B) outlet substitution.
C) commodity substitution.
D) both A and B.
E) both B and C.
Answer: B
Diff: 2 Type: MC
Topic: The Price Level and Inflation
22) Suppose a trade union and a firm agree to increase the wage rate by the same
percentage as the increase in the Consumer Price Index. If the CPI increases by 5 percent,
then the real income of workers will
A) increase by 5 percent as well.
B) remain unchanged, accounting for bias in the calculation of the CPI.
C) decrease by 5 percent, accounting for bias in the calculation of the CPI.
D) increase by more than 5 percent, accounting for bias in the calculation of the CPI.
E) increase by less than 5 percent, accounting for bias in the calculation of the CPI.
Answer: D
Diff: 3 Type: MC
Topic: The Price Level and Inflation

27) Of the following sequences of price levels, which correctly represents a 5 percent
inflation rate?
A) 100, 100, 100, 100
B) 100, 105, 105, 105
C) 100, 105, 110, 115
D) 100, 105, 110.25, 115.76
E) 95, 100, 105, 110
Answer: D
Type: MC
Topic: The Price Level and Inflation
Skill: Analytical
AACSB: Analytical Skills

30) Choose the incorrect statement.

A) The outlet substitution bias injects an upward bias into the CPI.
B) When the quality of a good improves over time and as a result the price rises, the CPI
counts the entire price rise as inflation and so overstates inflation.
C) When relative prices change and people substitute to the lower priced good, the CPI
ignores the substitution and the CPI overstates inflation.
D) The CPI basket is constantly updated to allow for the introduction of new goods.
E) All of the above statements are incorrect.
Answer: D
Type: MC
Topic: The Price Level and Inflation
Skill: Recognition
Source: MyEconLab
AACSB: Reflective Thinking

34) Between 1972 and 2012, Canada's inflation rate as measured by the CPI ________.
A) rises in some years and falls in some years
B) consistently rises every year
C) consistently falls every year
D) was always between 1 and 3 percent a year
E) was always positive
Answer: A
Type: MC

35) In China, suppose that the price level was 100 in 2007, 110 in 2008, 120 in 2009, and
130 in 2011. Over this time period,
A) zero inflation occurred.
B) the inflation rate increased.
C) the inflation rate was positive.
D) the inflation rate decreased.
E) Both C and D are correct.
Answer: E
Type: MC