ECN 101 FINAL EXAM QUESTIONS UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
Question:
1. If the rate of separation is 10% and the rate of finding a job is 20%, then the equilibrium unemployment
rate is
a) 33.33%
b) 50.00%
c) 66.67%
d) 100.00%
Answer:
A
Question:
2. When there is an increase in the rate of unionization in an economy, then
a) frictional unemployment increases.
b) the natural rate of unemployment increases.
c) both a) and b) are correct.
d) neither a) nor b) are correct.
Answer:
B
Question:
3. If the Philips curve is 5 = 585 − 3( 5b − 5b5[ ) + 5 and there are no ■ supply shocks. If monetary policy's
target is 6%, the natural rate of unemployment is 6%, and inflation has been 9%, what does the
unemployment rate have to be to achieve their target?
a) 3%
b) 6%
c) 7%
d) 9%
Answer:
C
Question:
4. If the sacrifice ratio is estimated to be 3, then to reduce inflation by 3 percentage points, would require
a) a total output increase of 1%.
b) a total output increase of 9%.
c) a total output decrease of 1%.
d) a total output decrease of 9%.
Answer:
D
, Question:
5. Which of the following would be an explanation for a hysteresis effect that increases the natural rate of
unemployment?
a) a string of positive shocks to aggregate demand (shifts right of aggregate demand).
b) labor outsiders are better able to negotiate higher wages for themselves.
c) skills of cyclically unemployed workers deteriorate over time.
d) oil prices begin to fall and then continually and steadily fall over time.
Answer:
C
Question:
6. Which of the following is a reason to support active stabilization policy?
a) policy affects the economy with a lag.
b) policy can offset shocks to the economy.
c) policy takes time to have an impact on the economy.
d) policy does not have an ability to affect unemployment.
Answer:
B
Question:
7. An example of an automatic stabilizer is
a) more people receive food stamps during a recession.
b) fewer people collect unemployment benefits during an expansion.
c) during a recession, people move down into lower tax brackets.
d) all of the above are examples.
Answer:
D
Question:
8. It is difficult to verify the Lucas Critique. Which of the following is a reason why?
a) It is hard to identify shocks in the economy.
b) It is hard to know how the economy would be different without implemented policies.
c) both a) and b) are reasons.
d) neither a) nor b) are reasons.
Answer:
C
Question:
9. Which of the following is an example of the time inconsistency problem?
a) monetary policy vows to fight inflation and dramatically increases the money supply.
b) President promises not to raise taxes but does so in order to balance the budget.
c) the Euro area requires limited budget deficits of members but when country's fail to comply they do not
enforce required punitive actions.
d) all of the above are examples of the time inconsistency problem.
Answer:
D
QUESTIONS AND CORRECT ANSWERS
Question:
1. If the rate of separation is 10% and the rate of finding a job is 20%, then the equilibrium unemployment
rate is
a) 33.33%
b) 50.00%
c) 66.67%
d) 100.00%
Answer:
A
Question:
2. When there is an increase in the rate of unionization in an economy, then
a) frictional unemployment increases.
b) the natural rate of unemployment increases.
c) both a) and b) are correct.
d) neither a) nor b) are correct.
Answer:
B
Question:
3. If the Philips curve is 5 = 585 − 3( 5b − 5b5[ ) + 5 and there are no ■ supply shocks. If monetary policy's
target is 6%, the natural rate of unemployment is 6%, and inflation has been 9%, what does the
unemployment rate have to be to achieve their target?
a) 3%
b) 6%
c) 7%
d) 9%
Answer:
C
Question:
4. If the sacrifice ratio is estimated to be 3, then to reduce inflation by 3 percentage points, would require
a) a total output increase of 1%.
b) a total output increase of 9%.
c) a total output decrease of 1%.
d) a total output decrease of 9%.
Answer:
D
, Question:
5. Which of the following would be an explanation for a hysteresis effect that increases the natural rate of
unemployment?
a) a string of positive shocks to aggregate demand (shifts right of aggregate demand).
b) labor outsiders are better able to negotiate higher wages for themselves.
c) skills of cyclically unemployed workers deteriorate over time.
d) oil prices begin to fall and then continually and steadily fall over time.
Answer:
C
Question:
6. Which of the following is a reason to support active stabilization policy?
a) policy affects the economy with a lag.
b) policy can offset shocks to the economy.
c) policy takes time to have an impact on the economy.
d) policy does not have an ability to affect unemployment.
Answer:
B
Question:
7. An example of an automatic stabilizer is
a) more people receive food stamps during a recession.
b) fewer people collect unemployment benefits during an expansion.
c) during a recession, people move down into lower tax brackets.
d) all of the above are examples.
Answer:
D
Question:
8. It is difficult to verify the Lucas Critique. Which of the following is a reason why?
a) It is hard to identify shocks in the economy.
b) It is hard to know how the economy would be different without implemented policies.
c) both a) and b) are reasons.
d) neither a) nor b) are reasons.
Answer:
C
Question:
9. Which of the following is an example of the time inconsistency problem?
a) monetary policy vows to fight inflation and dramatically increases the money supply.
b) President promises not to raise taxes but does so in order to balance the budget.
c) the Euro area requires limited budget deficits of members but when country's fail to comply they do not
enforce required punitive actions.
d) all of the above are examples of the time inconsistency problem.
Answer:
D
