macecon

by not taking into account the possibility of consumer substitution, the CPI

overstates the cost of living

changes in the producer price index are often thought to be useful in predicting changes in

the consumer price index

an increase in minimum wage would

decrease the quantity of labor demanded while increasing the quantity supplied

the primary purpose of measuring the overall level of prices in the economy is to

allow for the comparison of dollar figures from different points in time

the behavior of market prices over time show that natural resources

are not a limit to economic growth

the producer price index measures the cost of a basket of goods and services

bought by firms

unions

cause wages of non unionized workers to fall

the labor force

equals the number of people employed and unemployed

productivity

explains most of the differences in the standard of living across countries

true or false. according to the theory of efficiency wages, firms operate more efficiently if they can pay wages that are below the equilibrium level

false

true or false. full time students, retirees, and unpaid stay at home fathers are counted as unemployed

false

true or false. someone who is without work but is not looking for work would be counted as unemployed by the BLS.

false

true or false. Government policy can do nothing about the natural rate of unemployment

false.

the natural unemployment rate includes

frictional and structural unemployment

unemployment that exists because it takes time for workers to search for the job that suits them best is

frictional unemployment which partly accounts for the natural rate of unemployment

the CPI and GDP deflator

generally move together

the theory of efficiency wages explains why

it may be in the best interest of firms to offer wages that are above equilibrium level

a nations standard of living is determined by

its productivity

the consumer price index is used to

monitor changes in the cost of living

cyclical unemployment is closely associated with

short- run ups and downs of the economy

providing training for unemployed individuals is primarily intended to reduce

structural unemployment

economists use the term inflation to describe a situation in which

the economy's overall price level is rising

unemployment data is collected

through a regular survey of about 60,000 households

true or false substitution bias in computing CPI tends to make the CPI overstate the true increase in the cost of living.

true

true or false. Suppose the CPI today is 120 and five years ago it was 80. Then in today's prices something that costs $1 five years ago now costs $1.50

true

true or false. frictional unemployment is different from unemployment arising from minimum wage laws, unions, and efficiency wages because in the former, workers are searching for the jobs that best suit them, while in latter, workers are waiting for jobs to open up.

true

true or false. when some dollar amount is automatically corrected for inflation by law or contract, the amount is said to be indexed for inflation

true

when a union bargains successfully with an employer, in that industry

unemployment and wages increase