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Questions 1:
Cost–push inflation is least likely to be affected by an increase in:
A、 employee wages.
B 、finished goods prices.
C、 commodity prices.
Questions 2:
All else remaining equal, a decline in the average duration of unemployment most likely indicates that an economic:
A 、upturn is beginning.
B 、upturn has already occurred.
C 、downturn is forthcoming.
View answer resolution
【analysis】
B is correct. Cost–push inflation arises due to increases in costs associated with production: wages and raw materials prices.
A is incorrect. Cost–push inflation arises due to increases in costs associated with
production. Wages are the single biggest cost to businesses.
C is incorrect. Cost–push inflation arises due to increases in costs associated with
production. Commodities are an input to production, so they are major source of cost–
push inflation.
【analysis】
B is correct. The average duration of unemployment is a lagging economic indicator
because businesses wait until a downturn looks genuine before laying off employees and
until recoveries look secure before rehiring. If there is a decline in the average duration
of unemployment, then it means that companies have been hiring, which indicates that
an economic upturn has already occurred.
A is incorrect. Average duration of unemployment is a lagging indicator, not a coincident indicator.
C is incorrect. Although the average duration of unemployment is a lagging indicator,
it is more directly indicating that an upturn has been underway, not that a downturn
is forthcoming.
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