chapter 1 9 macroecon
Of the eight categories in the CPI market basket, which three categories make up more than 75% of the basket?
House, Transpiration, Food
Which of these statements about interest rates and inflation is true?
If there is zero inflation, the nominal interest rate is equal to the real interest rate. This is because the nominal interest rate (also called the stated or quoted interest rate) is equal to the real interest rate plus the rate of inflation. Savers will demand a real return which means some return over and above the rate of inflation, so that they can at least maintain the same level of purchasing power plus a small return.
Suppose the CPI in 2008 was 215.3 and the CPI in 2009 was 214.6, what was the inflation rate between 2008 and 2009?
Inflation rate = [(CPI1 - CPI0) / CPI0] x 100 = [(214.6 - 215.3) / 215.3] x 100 = -0.325 or -0.3%.
If the CPI was 207 in 2007 and 225 in 2011, what pay raise would someone who earned $50,000 in income in 2007 have to receive in order to keep her purchasing power constant in 2011?
Inflation rate = [(CPI1 - CPI0) / CPI0] x 100 = [(225 - 207) / 207] x 100 = 8.696. You can then multiply $50,000 x .08696 = $4,348. Her new salary will need to be $54,348 in order to maintain the same level of purchasing power.
Which of the following can give an early warning of future increases in the price level?
Producer price index
What effect do labor unionsLOADING... have on the unemployment rate?
Since few non-government workers are unionized, there is no significant effect on the unemployment rate
Which of these groups is included in the labor force?
The Unemployed
Which market basket specifically targets intermediate goods?
The basket used by the producer price index
To obtain prices of a representative group of goods and services, the Bureau of Labor Statistics (BLS) conducts a monthly survey of __________ households nationwide on their spending habits. The results of this survey are used to construct a market basket of __________ types of goods and services purchased by the typical urban family of four.
To obtain prices of a representative group of goods and services, the Bureau of Labor Statistics (BLS) conducts a survey of 14,000 households nationwide on their spending habits. The results of this survey are used to construct a market basket of 211 types of goods and services purchased by the typical urban family of four. The BLS then gathers monthly price information on this market basket of goods and services, and uses this to compute the CPI for that month. To determine the change in price, this CPI is compared to a previous CPI in order to calculate the percentage change in price from one period to the next.
Indicate whether the following statement is true or false and why. "A wage rising slower than the rate of inflation is actually falling."
True. If wages are increasing slower than the average price of goods and services, purchasing power falls.
Which of these persons is officially unemployed?
a non-working individual that has looked for employment in the past few weeks
Which of these demographic groups typically suffers from higher unemployment rates?
african americans
In general, __________ have much lower unemployment rates than other individuals with other levels of education.
college graduates
At full employment, __________.
cyclical unemployment is zero
Unanticipated deflation __________.
hurts net debtors
If the inflation rate is anticipated, __________.
inflation may not be a major problem
The natural rate of unemployment is the __________.
unemployment rate that results when the economy produces the potential level of real GDP
The producer price index tracks the prices firms receive for goods and services at:
all stages of production
If inflation is anticipated, __________.
it costs less to society than if unanticipated. Both borrowers and savers can adjust their strategies if they anticipate inflation to minimize the impact.
In calculating the CPI, the __________.
market basket does not include large equipment purchased by firms
The consumer price index __________.
measures the cost of an unchanging basket of goods and services
Economic variables that are calculated in current year prices are referred to as __________ variables, while variables that have been corrected to account for the effects of inflation are __________ variables.
nominal, real
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and job requirements is called __________.
structural unemployment
Which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment rate?
(Number of unemployed/Number in labor force) x 100
When the economy is at full employment
- the unemployment rate is greater than zero- the natural rate of unemployment prevails- all remaining unemployment is either frictional or structural
Suppose you are available for work but have not looked for a job for at least the last four weeks because you believe that no jobs are available. You would then be counted as __________.
a discouraged worker
When the economy is at full employment, which types of unemployment remain?
frictional and structural
The short-term unemployment that arises from workers, in the process of changing jobs, is called __________.
frictional uneployment
The "normal or natural" underlying level of unemployment in the economy is the __________.
full rate of unemployment
The true cost of borrowing and lending is best measured by
the real interest rate
