Macro Chapter 9 HW
Your father earned $34,000 per year in 1984. To the nearest dollar, what is that equivalent to in 2014 if the CPI in 2014 is 215 and the CPI in 1984 is 104?
$70,288 value in 2008 dollars= value in 1984 dollars x (CPI 2008/ CPI 1984)
Consider the following table: Nominal Average Hourly Earnings: Year- Earnings- CPI 2008- $16.00- 202 2009- $17.00- 207 2010- $18.00- 209 What is the real average hourly wage in 2009? What can be said about real average hourly earnings and nominal average hourly earnings between 2008 and 2010?
$8.21- real average hourly wage (i) = (nominal average hourly wage i/ CPI i) x 100 Both real and nominal average hourly earnings increase.
The BLS uses the establishment survey to collect information on employment in the economy. Indicate one drawback of the establishment survey compared to the current population survey and indicate one advantage.
- It is based on company payroll and not on unverifiable answers. - It does not include information about self-employed people.
How does the U.S. economy create and destroy millions of jobs each year? (Mark all that apply.)
- Some businesses are expanding, while others are contracting. - In the market system, new firms are constantly entering and exiting various industries.
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,
All of the above. - all remaining unemployment is either frictional or structural - the natural rate of unemployment prevails - the unemployment rate is greater than zero
When compared to the Great Depression, the typical length of unemployment in the modern (post-Great Depression-era) U.S. economy is
relatively brief.
Complete the following table: Base Years (2014 and 2016) Product Quantity Price Expendi. Denim Jeans Pizzas Coffee Drinks Total It doesn't matter what the values are- I'm not spending time typing them in here. Just add the expenditures from each column to get a total lol. The CPI in 2014 equals: The CPI in 2016 equals:
Adding expenditures: 330, 480, 465. CPI= (exp in current year/ exp in base year) x 100 2014= 145.45 2016= 140.91
Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics degree, what is the best classification of her unemployment status?
Structurally unemployed
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 the following can give an early warning of future increases in the price level?
producer price index
If a 3-month Treasury bill pays 5.5% and the change in the consumer price index (CPI) is 4.7%, what is the real interest rate (the true return to lending)?
0.8% Nominal interest rate: the stated interest rate on a loan. Real interest rate: the nominal interest rate minus the inflation rate.
Why is the unemployment rate, as measured by the Bureau of Labor Statistics, an imperfect measure of the extent of joblessness in the economy?
All of the above. - It fails to account for legal activities. - Underemployed people are considered employed. - It does not account for inaccurate responses to the Current Population Survey. - Discouraged workers are not considered unemployed.
Even perfectly anticipated inflation imposes costs. Why?
All of the above; Some wages will fail to keep up with anticipated inflation, Menu costs, Paper money loses its purchasing power by the rate of inflation.
Which of the following causes changes in the CPI to overstate the true inflation rate?
All of the above; substitution bias, new product bias, increase in quality bias
In January 2021, the working-age population of the United States was 260.9 million. The working-age population is divided into those in the labor force (160.2 million) and those not in the labor force (100.7 million). The labor force is divided into the employed (150.0 million) and the unemployed (10.1 million). Those not in the labor force are divided into those not available for work (93.6 million) and those available for work (7.1 million). Finally, those available for work but not in the labor force are divided into discouraged workers (0.6 million) and those currently not working for other reasons (6.5 million). Use this data to help determine which one of the following statements is true:
Both A and B above are true. - The unemployment rate is (10.1 mil/160.2 mil) x 100= 6.3 % - The labor force participation rate is (160.2 mil/260.9 mil) x 100= 61.4 %
According to Costco's CEO, Jim Sinegal: "Paying good wages and keeping your people working for you is good business...Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you." Sources: Alan B. Goldberg and Bill Ritter, "Costco CEO Finds Pro-Worker Means Profitability," ABCnews.com, Aug. 2, 2006; Lori Montgomery, "Maverick CEO Joins Push to Increase Minimum Wage," Washington Post, Jan. 30, 2007. What is Costco's CEO referring to?
Efficiency wages
Suppose John Q. Worker is currently unemployed. Each day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of skills, abilities, and interests. If someone asks John Q. what he does for work, he tells them that he is currently "in-between jobs." Which of the following best classifies John Q.'s unemployment status?
Frictionally unemployed
Suppose the fixed interest rate on a loan is 5.75% and the rate of inflation is expected to be 4.25%. The real interest rate is 1.5%. Suppose now that instead of 4.25%, the inflation rate unexpectedly reaches 5.5%. Who gains and who loses from this unanticipated inflation? (Mark all that apply.)
Real interest rate= Nominal interest rate- inflation rate - Borrowers gain from a lower real interest rate - Lenders lose from a lower real interest rate
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.
How do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment rate?
They decrease the opportunity cost of job search.
