1. The target rate of unemployment is defined as the absolute lowest possible ra

Question

1. The target rate of unemployment is defined as the absolute lowest possible rate of unemployment that can be achieved in any economy.

True False

2. The lowest sustainable rate of unemployment possible under existing conditions that will not lead to accelerating inflation is called the: A. minimum rate of unemployment. B. target rate of unemployment. C. maximum rate of unemployment. D. crazy rate of unemployment.

3.Keynesians would most likely agree that: A. all unemployment is generally frictional unemployment. B. if a person isn't working, that is his or her own choice. C. cyclical unemployment can be dealt with through government activist policies. D. unemployment is impossible, especially since Supply creates its own Demand.

4. If the potential labor force is 160 million, and the number of people working is 152 million, the unemployment rate is: A. 8 million. B. 5 percent. C. 5 million. D. 8 percent.

5.Inflation redistributes income from the people who raise their prices or wages to people who cannot or do not raise their prices or wages. True False

Explanation / Answer

(1) False

target unemployment rate that is the minimum unemployment rate that can be achieved which is sustainable and does not lead to more inflation.

(2) (B)

(3) (C)

Cyclical unemployment arises from a fall in aggregate demand during economic recessions, and Keynesians believe in government intervention in increasing aggregate demand to reduce cyclical unemployment.

(4) (B)

Unemployment rate = (Labor force - Number working) / Labor force = (160 - 152) / 160 = 8/160 = 0.05 = 5%

(5) False

Inflation re-distributes income from fixed-income people to flexible-income people, since fixed-income people are hurt by higher inflation.

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