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Problem Set 5

The document is a problem set for an Economics course (Econ 102) for Spring 2025, consisting of 10 questions related to labor statistics, economic concepts, and consumption functions. It covers topics such as unemployment rates, discouraged workers, Okun's law, aggregate expenditure, and the marginal propensity to consume. Each question provides multiple-choice answers to assess understanding of economic principles.

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5 views

Problem Set 5

The document is a problem set for an Economics course (Econ 102) for Spring 2025, consisting of 10 questions related to labor statistics, economic concepts, and consumption functions. It covers topics such as unemployment rates, discouraged workers, Okun's law, aggregate expenditure, and the marginal propensity to consume. Each question provides multiple-choice answers to assess understanding of economic principles.

Uploaded by

hoangbaohan.tran001
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Econ 102, Spring 2025

Problem Set 5

1. Suppose the U.S. Bureau of Labor Sta?s?cs classifies 135 million people as employed and
the unemployment rate is 10%. How many people are in the labor force in this example?

a. 140 million
b. 148.5 million
c. 150 million
d. 165 million
e. We don’t have enough informa?on to determine the size of the labor force.

2. Suppose a 50-year old, non-ins?tu?onalized civilian is not looking for a job, and is
considered by the U.S. Bureau of Labor Sta?s?cs to be a “discouraged worker”. Which other
BLS category would this person belong to?

a. Underemployed
b. Not in the labor force
c. Not surveyed
d. Unemployed
e. Employed

3. Okun’s “law” states that during an economic downturn:


a. Wages rise
b. Infla?on rises
c. Unemployment rises
d. Labor force par?cipa?on rises.

4. It is a stylized fact that a strong economic expansion tends to lead to…


a. An increase in cyclical unemployment
b. An increase in the infla?on rate
c. A decrease in wages
d. A decline in infla?on, as economic condi?ons improve
e. A decline in the labor force par?cipa?on rate.

5. Which one of the following statements is TRUE? You may need to look at some graphs (e.g.
of GDP growth or unemployment) in the slides/on FRED to think through some of the
answers.

a. Economists generally believe that a strong economic recovery or expansion will tend
to increase the rate of infla?on.
b. Recessions occur in the United States about every four years.
c. Recent data from the United States indicates that as soon as a recession ends, the
unemployment rate begins to decline.
d. Full employment is defined as an unemployment rate of 0%, where there is no
fric?onal unemployment.

6. In a closed economy with no government sector, aggregate expenditure is equal to …


a. Consump?on plus intended investment
b. Consump?on minus intended investment
c. Income plus intended investment
d. Consump?on plus intended investment and unintended inventory accumula?on
e. Output plus intended investment

7. Unintended inventory investment occurs when …

a. these inventories build up unexpectedly.


b. firms cannot sell their goods as quickly as expected.
c. firms decide to produce a larger quan?ty to sell in the future.
d. firms underinvest purposefully.
e. Both a. and b.

8. If aggregate demand is greater than GDP, then …

a. There is excess inventory depletion in the economy.


b. GDP will rise to meet this higher demand for goods and services.
c. Firms reduce their investment spending since the economy is overheating.
d. Prices will fall.

9. The marginal propensity to consume (mpc) is the ra?o of:

a. The change in consump?on to the change in income


b. Consump?on to income
c. Savings to consump?on
d. Consump?on less savings, rela?ve to income
e. Consump?on to investment

10. Which variable determines the slope of the consump?on func?on?


a. Autonomous consump?on
b. The marginal propensity to consume
c. The marginal propensity to save
d. The unemployment rate
e. One minus the marginal propensity to consume
f. Infla?on

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