ECN 101 Final Practice Exam Questions
and Answers12
B - ANSWERS -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.
C - ANSWERS -If the Philips curve is 𝜋 = 𝐸𝜋 − 3(𝑢 − 𝑢𝑛) + 𝜈 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%
D - ANSWERS -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%.
, A - ANSWERS -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%
C - ANSWERS -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.
B - ANSWERS -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.
D - ANSWERS -An example of an automatic stabilizer is
a) more people receive food stamps during a recession.
and Answers12
B - ANSWERS -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.
C - ANSWERS -If the Philips curve is 𝜋 = 𝐸𝜋 − 3(𝑢 − 𝑢𝑛) + 𝜈 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%
D - ANSWERS -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%.
, A - ANSWERS -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%
C - ANSWERS -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.
B - ANSWERS -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.
D - ANSWERS -An example of an automatic stabilizer is
a) more people receive food stamps during a recession.
