Chapter 4 — Quiz

Multiple choice

Q1. The Bureau of Labor Statistics (BLS) produces: a) GDP b) The Consumer Price Index and the Employment Situation report c) The decennial census d) Federal funds rate

Q2. FRED stands for: a) Federal Reserve Economic Data b) Federal Resource for Economic Discovery c) Forecasting and Research Economic Database d) Fiscal Research and Economic Data

Q3. The BLS Establishment Survey: a) Surveys households and produces the unemployment rate b) Surveys businesses and produces the nonfarm payroll number c) Surveys government agencies only d) Is conducted every five years

Q4. U-3 unemployment: a) Includes discouraged workers and part-time workers seeking full-time work b) Is the headline unemployment rate (people actively looking for work as a share of the labor force) c) Includes anyone over 16 not currently working d) Is the same as the labor force participation rate

Q5. U-6 unemployment is: a) The same as U-3 b) The narrowest measure of unemployment c) A broader measure that includes marginal workers and those working part-time for economic reasons d) Used only by the Census Bureau

Q6. Core CPI: a) Includes all items b) Excludes food and energy c) Includes only essential goods d) Is computed by the Federal Reserve, not the BLS

Q7. A reason core CPI is preferred for monetary policy: a) It is higher than headline CPI b) Food and energy prices are highly volatile in the short run, so excluding them gives a clearer signal of underlying inflation c) Households don't spend money on food and energy d) Core CPI is the same as Producer Price Index

Q8. Substitution bias in the CPI causes the index to: a) Overstate true inflation b) Understate true inflation c) Be exactly correct d) Vary unpredictably

Q9. A truncated y-axis on a line chart: a) Always misleads the reader b) Can make small changes look much larger than they are c) Is required by accounting standards d) Has no effect on how the chart is perceived

Q10. When a chart shows the U.S. unemployment rate from 2009 to 2019, it generally shows: a) A nearly continuous decline (because 2009 was the peak of the Great Recession) b) A nearly continuous rise c) Random fluctuation d) A flat line

Q11. "Median household income" and "mean household income" differ because: a) The mean is pulled up by very high earners; the median is the middle of the distribution b) Median is more accurate c) They are computed by different agencies d) They are actually the same number

Q12. When fact-checking an economic claim, the most important first step is: a) Look up who the journalist is b) Identify the claim precisely and find the source c) Read the comments d) Compare to what other journalists are saying

Short answer

SA1. What does the labor force participation rate measure, and why does it matter for interpreting changes in the unemployment rate?

SA2. What are the three biases in CPI measurement, and why does each tend to overstate inflation?

SA3. Why might your personal experience of inflation differ from the official CPI rate?

SA4. Name three FRED series that you could look up if you wanted to fact-check a claim about the U.S. labor market.

SA5. A news article says: "Inflation hit 9.1% in June 2022, the highest level in 40 years." How would you fact-check this claim using FRED?

True / False

TF1. FRED is a private subscription service. (True / False)

TF2. The BLS Establishment Survey produces the headline unemployment rate. (True / False)

TF3. Core CPI tends to be more volatile than headline CPI. (True / False)

TF4. A chart can mislead even when the underlying data is correct. (True / False)

TF5. It is generally a bad idea to compare nominal and real values without adjusting for inflation. (True / False)

Selected answers and walkthroughs in appendices/answers-to-selected.md.