AGEC 217 CH 6

David works as a software developer, but he recently took paternity leave after he and his wife had a child. David is considered to be

employed

In 2008, the rate of inflation was 2%, which then rose to 3% in 2009 before falling back to 2% in 2010. Between 2008 and 2009, the economy experienced _____ and between 2009 and 2010, the economy experienced _____.

inflation; disinflation

Jessie has been out of work for more than a year. A few months ago she gave up trying to get a new job until the economy gets better. Jessie is considered to be

marginally attached

The _____ rate of unemployment is the unemployment rate associated with minimal upward pressure on prices.

natural

Real

prior years prices of goods or service

_____ occurs when there is a change in consumer demand or technology requiring that unemployed people retrain for new jobs.

structural unemployment

June is a surgeon who took a job as a lifeguard at a local pool because she was unable to find a job in the medical field. June is considered to be

underemployed

The table shows the cost of a fixed basket of goods that a typical urban consumer would buy in the economy of Kindleberger. The base period for the consumer price index (CPI) is the year 2000. Please specify answers to two decimal places. Year Cost of a basket of goods 2000 $4,150.00 2011 $8,500.00 2012 $8,725.00 What is the CPI for 2000? What is the CPI for 2011? What is the CPI for 2012?

CPI for 2000: 100 4150/4150*100 CPI for 2011: 204.82 8500/4150*100 CPI for 2012: 210.24 8725/4150*100

If there are 1,500 in the population; 900 are employed; and 100 are unemployed, what is the unemployment rate?

10% 900/1000=90% employment rate 100-90=10% unemployment rate

If a set basket of goods costs $6,000 in the current year and $5,000 in the base year, what is the consumer price index?

120 6000/5000*100

Suppose that the CPI in 2013 was 250 and the CPI in 2014 was 260. What is the rate of inflation in this economy?

4.0% 260/250*100-100=4.0%

Suppose that in Southlandia, frictional unemployment is 2%, structural unemployment is 3%, and cyclical unemployment is 4%. What is the natural rate of unemployment in Southlandia?

5%

If a set basket of goods costs $6,000 in the current year and $5,000 in the base year, how much have prices risen since the base year?

20% (6000/5000*100)-100

Why is the consumer price index a conditional cost-of-goods index?

It measures only private goods and services.

An extremely high rate of inflation, above 100% per year, is referred to as

hyperinflation

Cheryl lost her job as an accountant six months ago and took a job stocking shelves at a local retailer. The Bureau of Labor Statistics would classify her as

underemployed

What does a consumer price index of 130 mean?

Prices have increased by 30% from the base year to the current year. A consumer price index of 130 means that prices have increased by 30% from the base year to the current year.

People tend to go back to school, seek early retirement, or just take time off when

a recession occurs

The unemployment that is typically short term is _____ unemployment.

frictional

Frank is an accountant who during a recession had to take a job as a line cook at a restaurant because he was unable to find a job that better suited his skills. Frank is considered to be

underemployed

One limitation of the unemployment rate as a measure of labor market health is that it does not include

discouraged workers

Which of the statements is the best description of inflation?

An increase in the overall price level has occurred.

When was the percentage change in the GDP deflator the highest?

after World War II ended The percentage change in the GDP deflator was the highest in 1945.

The _____ measures the average prices paid by urban consumers for a typical market basket of consumer goods and services.

CPI

Jonathan is currently enrolled in college full-time; however, he works part-time at a restaurant on weekends to earn some spending cash. Jonathan would be considered:

employed

Kelly is an adjunct professor of economics at a junior college. She recently landed a tenure-track position at a four-year college beginning next fall. She plans not to teach any classes over the summer. This period of unemployment during the summer is considered to be _____ unemployment.

frictional

For more than 10 years, Kenneth has worked at a job fixing machinery used to produce textiles. As more and more clothing manufacturers moved overseas to lower labor costs, his services were less and less in demand until ultimately he found himself out of a job. What type of unemployment is Kenneth experiencing?

structural

Roger worked in a coal mine until it went out of business because fewer people were using coal to heat their homes. Now he is unable to find a new job because he is not qualified for any of the jobs that are available. This is an example of _____ unemployment.

structural

Unanticipated inflation leads to

faulty signals that can reduce producer and consumer welfare. (Unexpected inflation may lead to consumers reducing their consumption.)

Suppose the PPI data showed strong increases. An economist might expect

higher costs for producers to be translated into higher prices for consumers.(Higher costs might be passed along to the consumer as higher prices.)

The natural rate of unemployment is the level also known as the nonaccelerating _____ rate of unemployment.

inflation

Nominal

price of good or service in todays prices

Deflation

prices are actually falling

Disinflation

prices are still rising but not as fast as before

_____ is/are natural for an economy and is/are seen as necessary and beneficial.

Only frictional unemployment

Policymakers can have the greatest impact on ____ by keeping the economy on a steady, low-inflationary, solid growth path.

Cyclical unemployment (results from changes in the business cycle.)

After graduating from college in 2010, Art Major's starting salary is $50757.00. Suppose Art Major has a cost of living adjustment (COLA) clause, or an escalator clause, in his labor contract so that he will be able to maintain this same level of purchasing power in real terms in 2011 and 2012. Using the information in the table, how much will Art Major earn in 2011 and 2012 if his salary keeps up with inflation? Round your answers to the nearest dollar. Year CPI 2010 102.57 2011 104.90 2012 109.35 What is Art Major's salary in 2011? What is Art Major's salary in 2012?

Art Major's salary in 2011:new salary = salary current year index* original year index year/currentyear =$50757.00 * 104.90/102.57 = 51.910.01 Art Major's salary in 2012: = 51.910.01* 109.35/104.90= 54,112.10

Which is an example of an efficiency wage?

Because Susan gets paid above the market equilibrium rate, she is motivated to work hard and stay in her job.

_____ workers are those who have given up actively looking for work and as a result are not counted as unemployed.

Discouraged

Determine if the people in the example have benefited - i.e., are winners - or have been harmed - i.e., are losers - by unexpected inflation. a. The United States federal government, which had almost $15 trillion in debt in 2011 b. Karen, a retired school teacher who relies upon her fixed pension to pay for her expenses c. Third National, a bank that loaned many people money for home purchases d. Joy, who borrowed $40,000 to pay for her college education e. Herb, who keeps his savings in an old coffee can

a. winner b. loser c.loser d. winner e. loser

Which of these would tend to cause inflation?

an increase in consumer confidence

Anita Job is the new Treasury Secretary, and she is trying to interpret the inflation measures for two consecutive years. In year one, the aggregate price level increased by 7% and, in year two, the aggregate price level increased by 2% . Which term describes the change in the price level from year one to year two?

disinflation