LC23: LearningCurve - Ch. 23: Unemployment and Inflation

Shoe-leather costs:

increase as the rate of inflation increases.

If the minimum wage is set above the market equilibrium wage rate, then:

the government has established a binding price floor with the minimum wage.

_____ workers would like to be employed and have looked for a job in the recent past but are not currently looking for work.

Marginally attached

The broadest measure of unemployment is:

U-6.

Ann receives a wage of $1,000 per month. After a year, the prices of goods begin to rise. Ann's real wage:

decreases.

The _____ interest rate is the interest rate expressed in dollar terms.

nominal

An economy has five people: George, Sarah, Mason, Abbot, and Jin. George works for Plastics, Inc., 40 hours a week. Sarah works for Baker's United for 20 hours a week and would like to move from part-time work to full-time work. Mason has been looking for work and applying for jobs for the past six months after he finished completing his high school education. Abbot worked for Baker's United for the first six months of the year before he was fired; for the next four months Abbot sought work, but finally gave up looking for work when he realized that it was unlikely that he would be able to find work in this economy. Jin is 70 years old and enjoys reading, needlepoint, and watching movies. The unemployed in this economy include:

only Mason.

Income divided by the price level is _____ income.

real

The _____ interest rate is the nominal interest rate minus the rate of inflation.

real

The _____ wage is the wage rate divided by the price level.

real

From the following, which would be the most important objective of policy makers related to the stability of prices in an economy?

to keep the inflation stable

_____ refers to the number of people currently employed in the economy, either full time or part time.

Employment

_____ costs are the real cost of changing a listed price.

Menu

If policy is used to reduce unemployment below the natural rate:

inflation occurs

The natural rate of unemployment would decrease if the:

labor force is older than the norm.

The percentage of the population aged 16 or older that is in the labor force is called the:

labor force participation rate.

The sum of employment and unemployment is equal to the:

labor force.

Costs that arise from the way that inflation makes money a less reliable unit of measurement are called _____ costs.

unit-of-account

Efficiency wages are efficient for a firm because they are paid to workers who:

will accept wages above the equilibrium wage rate.

Unemployment _____ during periods of economic expansion.

may increase or decrease

The table shows a price index for 2005 through 2008. The inflation rate for 2007 was _____%. A table shows 2 columns and 4 rows. The column headers are as follows: Year, Price level. The data read as follows: Year: 2005; Price level: 95. Year: 2006; Price level: 100. Year: 2007; Price level: 110. Year: 2008; Price level: 114.

10.0

In the nation of Erewhon, 10 million workers are unemployed, and 140 million workers are employed. The total population is 300 million and the population that is aged 16 and older is 200 million. The labor force of Erewhon is _____ million workers.

150

In the last 50 years, the lowest U.S. unemployment rate has been _____%.

2.9

If the number of people employed is 80,000, and the number of people unemployed is 20,000, the unemployment rate is _____%.

20

The figure shows the demand and supply of labor in a particular labor market where the quantity of labor per day is measured in numbers of workers. According to the figure, at a wage of $35, _____ people will be unemployed. A graph shows a demand curve and a supply curve with quantity of labor (per day), Wage rate. The graph shows quantity of labor (per day) along the horizontal axis and wage rate along the vertical axis. The graph shows a demand curve with a negative slope and a supply curve with a positive slope. Both the curves intersect at quantity 50, wage rate 25 dollars. The approximate points are as follows: quantity of labor 30, wage rate 35 dollars; quantity of labor 40, wage rate 30 dollars; quantity of labor 50, wage rate 25 dollars; quantity of labor 60, wage rate 20; quantity of labor 70, wage rate 15 dollars.

40

The table shows population and employment data for Collegetown. The size of the labor force in Collegetown is: Population, under 16 years old, retired, discouraged workers, not working and not looking for work, unemployed, and employed. The data read as follows: Population: 1,000; Under 16 years old: 200; Retired: 130; Discouraged workers, not working and not looking for work: 70; Unemployed: 50; Employed: 550.

600.

The figure shows the demand and supply of labor in a particular labor market where the quantity of labor per day is measured in numbers of workers. At a wage of $35, the labor force will be _____ people.

70

The _____ is the government agency that calculates the unemployment rate.

Bureau of Labor Statistics

An economy has five people: George, Sarah, Mason, Abbot, and Jin. George works for Plastics, Inc., 40 hours a week. Sarah works for Baker's United for 20 hours a week and would like to move from part-time work to full-time work. Mason has been looking for work and applying for jobs for the past six months after he finished completing his high school education. Abbot worked for Baker's United for the first six months of the year before he was fired; for the next four months Abbot sought work, but finally gave up looking for work when he realized that it was unlikely he would be able to find work in this economy. Jin is 70 years old and enjoys reading, needlepoint, and watching movies. In this economy, the employed include:

George and Sarah.

_____ is an increase in the overall level of prices.

Inflation

If Jim loans Sam $1,000 at 5% interest and there is an unexpected inflation of 2%, then:

Sam benefits.

_____ costs are the increased costs of transactions caused by inflation.

Shoe-leather

_____ unemployment exists when there are more people seeking jobs in a labor market than there are jobs available at the current wage.

Structural

_____ refers to the number of people who are not working and actively looking for work, but are not currently employed.

Unemployment

_____ costs arise from the way inflation makes money a less reliable unit of measurement.

Unit-of-account

Which is a reason why the unemployment rate might overstate the true level of unemployment?

Workers who are confident that they have found jobs are still counted as unemployed.

What is the main cost related to disinflation?

a temporary but very large increase in the unemployment rate

Structural unemployment occurs when the wage in a labor market is _____ the equilibrium wage.

above

Which will cause the natural rate of unemployment to decrease?

an increase in the median age of the labor force

In an economy, the demand for labor is given by the equation W = 15 - (1/200) L and the supply of labor is given by the equation W = 5 + (1/200) L, where W is the wage rate and L is the quantity of labor. If the government imposes a minimum wage of $12 in this market, the minimum wage will MOST likely:

create an excess supply of labor because it is a binding minimum wage.

According to the text, a reduction in union membership tends to _____ the natural rate of unemployment.

decrease

Ann lost her job when the steel plant closed three years ago. She gave up looking for a job a year ago because of the persistently high unemployment in her city. Ann is classified as a(n) _____ worker.

discouraged

The process of bringing down the inflation rate is called:

disinflation.

Structural unemployment may be caused by firms paying:

efficiency wages.

Workers who spend time looking for employment are:

engaged in job search.

All of the following statements about frictional unemployment are true EXCEPT that:

frictional unemployment means that there is a persistent surplus of labor.

When the actual unemployment rate is low, most unemployment is:

frictional.

If an employed person retires and no one is hired to replace him, the unemployment rate will:

increase.

Inflation causes nominal interest rates to:

increase.

When the growth rate of real GDP (gross domestic product) decreases, the unemployment rate:

increases.

When the growth rate of real GDP (gross domestic product) is below average, the unemployment rate usually:

increases.

During the late 1970s and early 1980s, _____ was a problem for the U.S. economy.

inflation

A zero unemployment rate:

is not feasible.

The increased transaction costs caused by inflation are known as _____ costs.

shoe-leather

If the government establishes a minimum wage above the equilibrium wage, there may be some _____ unemployment.

structural

When firms pay efficiency wages, _____ unemployment may occur.

structural

The natural rate of unemployment equals:

the sum of frictional and structural unemployment.

Frictional unemployment is caused by the:

time workers spend searching for jobs.

The _____ is the percentage of the labor force that is unemployed.

unemployment rate

The table shows population and employment data for Collegetown. The number of people available for work but no longer looking for work in Collegetown is: A table titled Population Data for Collegetown shows 6 rows and 2 columns. The rows read as Population, under 16 years old, retired, discouraged workers, not working and not looking for work, unemployed, and employed. The data read as follows: Population: 1,000; Under 16 years old: 200; Retired: 130; Discouraged workers, not working and not looking for work: 70; Unemployed: 50; Employed: 550.

200.

In the Island of Fortune, 10 million workers are unemployed, and 140 million workers are employed. The total population is 300 million and the population that is aged 16 and older is 200 million. The labor force participation rate for the Island of Fortune is _____%.

75

_____ unemployment is the deviation of the actual rate of unemployment from the natural rate.

Cyclical

_____ are nonworking people who are capable of working but have given up looking for a job because of the state of the job market.

Discouraged workers

_____ unemployment is caused by the time workers spend in job search.

Frictional

If wages and prices fall at the same rate in the economy, then:

real incomes are not affected if all wages and prices fall at the same rate.