Chapter 20 Unemployment and Inflation
Which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment rate?
(Number of unemployed/number in labor force)*100
As of August 2015, which of the following demographic groups has the highest unemployment rate?
African Americans
Which groups tend to have above-average unemployment rates, and which groups tend to have below-average unemployment rates? Consider the following choices. Which one is not accurate?
Black teenagers as a group have lower unemployment rates than white teenagers.
The price index which is used to measure changes in the cost of living is the
Consumer Price Index (CPI).
Which of the following is not considered one of the potential biases in calculating the consumer price index?
Coverage bias.
Briefly explain whether you agree or disagree with the following statement: "I don't believe the government price statistics. The CPI for 2016 was 215, but I know that the inflation rate couldn't have been as high as 115 percent in 2016."
Disagree. The inflation rate is the percentage increase in the price level from the previous year, not the base yea
Most economists agree that the above-market wage paid in unionized industries significantly increases the unemployment rate in the United States.
False
Which one of the following is not a measure of the price level?
Government Price Index: an average of the prices paid by the government for goods and services used only by different government agencies.
Which of the following is the correct formula for calculating the unemployment rate?
Number of unemployed/ Labor force×100
During a period of deflation, which of the following statements is true?
Real average hourly earnings are likely to increase faster than nominal average hourly earnings during a period of deflation.
What effect do labor unions have on the unemployment rate?
Since few non-government workers are unionized, there is no significant effect on the unemployment rate.
What is the difference between the consumer price index and the producer price index?
The consumer price index is an average of the prices of the goods and services purchased by the typical urban family of four, whereas the producer price index is an average of the prices received by producers of goods and services at all stages of the production process.
Which one of the following depicts an accurate description of the household survey and the establishment survey?
The household survey interviews households and measures the unemployment rate whereas the establishment survey interviews businesses and measures the employment rate.
Currently, the Bureau of Labor Statistics does not include homemakers in its employment and labor force totals. What would happen to the unemployment rate and the labor force participation rate if homemakers were included in these numbers?
The unemployment rate would decrease and the labor force participation rate would increase.
How would it affect the unemployment rate if the Bureau of Labor Statistics counted as unemployed both (1) discouraged workers and (2) people who work part-time but would prefer to work full-time?
The unemployment rate would increase.
Which of the following is not one of the conditions someone needs to meet to be counted as unemployed?
They had worked only one hour per week during the previous four weeks.
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.
The unemployment rate is calculated as follows:
Unemployment Rate = (Number of Unemployed / Labor Force) 100
Government unemployment payments can increase the unemployment rate by
allowing the unemployed to be more picky about taking a new job.
When a firm pays a wage that is higher than the market wage in order to increase worker productivity, the wage is called
an efficiency wage.
If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then
changes in the CPI overstate the true rate of inflation.
When an unemployed person drops out of the labor force, it
does not affect the employment-population ratio.
The labor force equals the number of people
employed plus unemployed.
If the employment-to-population ratio increased while the labor force participation remained largely unchanged, it is because any increase in
employment would have been offset by a fall in unemployment.
In June 2015, the unemployment rate declined to 5.3 percent from 5.5 percent in May. The labor force participation rate also declined from May to June, from 62.9 percent to 62.6 percent. If the labor force participation rate had remained unchanged from May to June, the unemployment rate for June 2015 would be
greater than 5.3 percent because the value in the numerator of the formula for the unemployment rate would increase more than the value in the denominator.
The minimum wage law
has only a small effect on the unemployment rate since only a small part of the labor force earns the minimum wage.
Which of the following steps has not been taken by the Bureau of Labor Statistics (BLS) to reduce the size of the biases in the CPI?
he BLS has expanded the number of stores from which it collects the price information to reduce the coverage bias.
Government unemployment insurance tends to
increase the unemployment rate by lowering the opportunity cost of job search.
Increases in the minimum wage will
increase unemployment among teenagers.
An efficiency wage
increases the unemployment rate since firms pay a higher-than-market wage that increases the quantity of labor supplied
The difference between a nominal variable and a real variable is that
nominal variables are calculated in current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation.
All of the following are problems in measuring the unemployment rate except that
people on active military service are included as unemployed.
The employment-population ratio measures the
percentage of the working age population that is employed.
The payment of government unemployment insurance reduces the severity of recessions by
preventing a huge drop in income and spending for the unemployed.
The type of unemployment most likely to result in hardship for the people who are unemployed is
structural because this type of unemployment requires retraining to acquire new job skills.
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called
structural unemployment.
In early 2015, the employment-to-population ratio was increasing, while the labor force participation rate remained largely unchanged. When employment rises, the labor force participation rate and the employment-population ratio will both increase because
the denominators are the same and employment is included in both of the numerators.
When the economy is at full employment, unemployment is equal to
the natural rate of unemployment.
The unemployment rate in the United States typically has been lower than the unemployment rates in Canada and countries in Western Europe because
the opportunity cost of job search is lower in Canada and countries of Western Europe and unemployed workers in those countries search longer for jobs.
The labor force participation rate is calculated by
the percentage of the working-age population that is in the labor force or (Labor force/ Working−age population)×100.
The true cost of borrowing and lending is best measured by
the real interest rate.
The natural rate of unemployment is
the sum of structural unemployment and frictional unemployment.
The "normal" underlying level of unemployment in the economy is
the sum of structural unemployment and frictional unemployment. the natural rate of unemployment. the full-employment rate of unemployment.
Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,
the unemployment rate increased.
When the economy is at full employment,
the unemployment rate is greater than zero. all remaining unemployment is either frictional or structural. the natural rate of unemployment prevails.
hen there are workers that drop out of the labor forceworkers that drop out of the labor force, the official BLS measure of the unemployment rate _______ the true degree of unemployment.
understates
When an unemployed person drops out of the labor force, the unemployment rate
understates the true degree of joblessness in the economy.
Is there a contradiction between a low inflation rate as measured by the CPI and the observations that prices are "the highest they've ever been" and everything is "so expensive"?
No, because the CPI and inflation measure only changes in the price level, not the absolute level of prices.
The three types of unemployment are
frictional, structural, and cyclical unemploment.
The unemployment rate in the United States is usually ________ than the unemployment rates in most other high-income countries, partly because the United States has _________ requirements for the unemployed to receive government payments.
lower; more stringent
