MACRO ECON Chapter 6 Test Prep
searching, matching
Job ______ and ______: It takes time to find a job and for employers to find the right employees.
% Change in Price = [(CPI in current year / CPI in original year) x 100] - 100
% Change in Price
Salary Last Year ( 1 + ____ %) = ______
% Change in Price : Salary Question Formula
adjusted
- Workers whose wages have escalator clauses - Social Security recipients whose benefits are ____ with inflation - Banks that properly anticipate inflation
Structural
A paragraph from the report discussed in the UN Department of Economic and Social Affairs states that "With the rapid technological advancement of recent years, computers are increasingly encroaching on domains that were previously considered exclusively human. The astonishing progress in such areas as artificial intelligence (AI), robotics, 3D printing and genetics has enabled computers to perform the tasks of architects, medical doctors, music composers and even a 16th century Dutch master of painting. Nearly every day brings news of remarkable feats achieved by computers or robots, and with them a gnawing question: Will machines edge us out of brain jobs?" What type of unemployment is discussed in the UN report?
employed, 15
A person is counted as _____ if any of the following applies: - Works full-time or part-time - Works at a temporary job - Has a job but is on vacation, ill, on maternity leave, on strike, etc. - Is an unpaid family worker working at least ____ hours per week
83.84
According to Table 1 below, choose the answer that most accurately estimates GDP Deflator (2018) (round to two decimal points): Table 1. 2018 2019 2020 Nominal GDP (billions of $) 5,234 10,248 Real GDP (billions of $) 6,243 8,680 GDP Deflator 94.21 118.41
$8,655
According to Table 1 below, choose the answer that most accurately estimates Real GDP (2020) of the country Macro-Eco: Table 1. 2018 2019 2020 Nominal GDP (billions of $) 5,234 10,248 Real GDP (billions of $) 6,243 8,680 GDP Deflator 94.21 118.41
nonaccelerating
Also referred to as the ________ inflation rate of unemployment (NAIRU) -Inflationary pressures are at their minimum. -Actual inflation is equal to expectations. -Price and wage decisions are consistent. -Cyclical unemployment is zero.
Unemployed, 4
An _____ person does not have a job but has been ACTIVELY SEEKING work in the past ___ weeks.
private
CPI measures only ______ goods.
out-of-pocket
CPI measures only consumers' ___ -____-____ health care expenditures. It does not measure the overall rise in health care costs.
fixed
CPI tends to overstate inflation because it uses a _______ market basket. - It does not account for product substitution, quality improvements, or new products.
High healthcare costs
Choose the answer that does NOT explain why wages may remain above the market clearing level and result in unemployment.
CPI = (Cost in current period / Cost in base period) x 100
Consumer Price Index Formula
Bureau of Labor Statistics (BLS)
Each month, the _____ ___ _____ ______ issues updates on inflation: 1. Consumer price index (CPI) measures the retail price level. 2. Personal consumption expenditures (PCE) accounts for product substitution. 3. Producer price index (PPI) measures wholesale prices. 4. GDP deflator measures the average price of all items in GDP.
Efficiency wages, Union bargaining, and minimum wage laws
Explain why wages may remain above the market clearing level and result in unemployment.
Def = Nom / Real x 100.0
GDP Deflator Formula
government spending, money
Hyperinflation is typically caused by excessive _____ _____ over tax revenues and the printing of ______ to finance deficits. - Workers are paid frequently, and purchases are made immediately. - Eventually, the monetary system breaks down, and barter is used. Foreign currencies become valuable as a medium of exchange.
51,818
If Sandra's salary was $50,000 last year, and this year she receives a cost-of-living increase tied to the consumer price index (CPI), what will her salary be this year assuming the CPI has risen from 110 to 114?
5%
If frictional unemployment is 2%, structural unemployment is 3%, and cyclical unemployment is 4%, the natural rate of unemployment is ______.
4.59
If the current year's consumer price index is 228 and last year's consumer price index was 218, then the rate of inflation is:
11.1%
If there are 1,500 people in the population; 800 are employed; and 100 are unemployed, what is the unemployment rate?
$1,021,382
In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 207 for 2007. President Hoover's 1931 salary was equivalent to a 2007 salary of about
Friction + Structure
Natural Rate of Unemployment
Real value = Nominal value x (Base year index ÷ Current year index)
Nominal values are converted to real values using the following formula:
nominal, real
Price indexes are used to modify payments to account for inflation. - They are used to convert ________ values to _____ values.
creditors gain at the expense of debtors.
Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% with the expectation of a 3% return after inflation. If the actual inflation rate at the end of the year is 2%
cost-of-goods index
THE CPI MEASURES THE AVERAGE CHANGE IN PRICES PAID BY URBAN CONSUMERS (CPI-U) AND URBAN WAGE EARNERS (CPI-W) FOR A MARKET BASKET OF CONSUMER GOODS AND SERVICES. - CPI is a _______-___-____ ______: It compares the cost of a fixed bundle of goods and services from one period to the next.
employed, unemployed
The Labor Force is the total number of the ____ and ______
The Rate of Inflation
The PERCENTAGE increase in prices over a 12-month period is referred to as:
Number of people unemployed / labor force
The Unemployment Rate Formula
Producer Price Index (PPI)
The ___ ____ ____ measures the average CHANGE IN THE PRICES receives by domestic PRODUCERS for their output.
GDP Deflator
The ____ _____ is an index of the average prices for all goods and services in the economy, including all components of GDP: Consumption, Investment, Government Spending, and Net Exports.
Real, Constant
____ GDP : The value of goods and services measures using CONSTANT SET OF PRICES
Nominal, current
____ GDP: The value of goods and services measured at _____ PRICES
Household
____ Survey: A survey of around 60,000 households by the census bureau
Consumer Price Index
____ ____ ____: measures the retail price level.
GDP deflator
____ _____ measures the average price of all items in GDP.
Deflation
_____ : A DECLINE in PRICE LEVEL. Price on average FALL.
Payroll
_____ Survey: Covers 142,000 government agencies
Unions, bargaining
_____ and collective ______: Wages of unionized workers are nor determined by supply and demand, but by bargaining.
Business
_____ cycle: Recessions reduce consumer demand, leading to layoffs.
High, too costly
_____ minimum wages: If wages are___ ______, hiring is likely to be reduced.
Cyclical
_____ unemployment is the result of changes in the business cycle.
underemployed
_____ workers: those working part-time for economic reasons (Uber, Lyft) and SEEKING A BETTER JOB.
Disinflation
______ : A REDUCTION in the rate of inflation. Prices rise at a DECREASING rate.
Inflation
______ : is a general rise in prices of goods and services.
Government
______ POLICY: its ability to borrow and print money.
Jobless
______ Recovery: -Economic recovery may not always coincide with the job growth. -Marginally attached workers, students, underemployed are not included in labor force. -When the economy recovers these groups compete for jobs and enter the labor force.
Producer Price Index
______ ____ _____ measures wholesale prices
Personal Consumption Expenditures
______ _____ ____ accounts for product substitution
marginally attached, 12 months
______ ______ workers: those who actively looked for work in the past ____ ______ but not in the past four weeks.
Demographic
______ changes: average AGE of population; birth rates; immigration
Economic
______ conditions: more discouraged workers; workers going back to school
Population
______ growth: Overall rise in the number of available workers.
Cyclical, cycle
______ unemployment is caused by fluctuations in the business _____ (e.g., recessions).
Frictional, voluntarily
______ unemployment results from workers who _______ quit to search for a better position (usually short-term).
Efficiency, above
______ wages: Wages are kept ______ market equilibrium to reduce turnover and to improve productivity
discouraged
______ workers: the portion of marginally attached workers who have given up actively looking for work.
Demand
_______ FACTORS: consumer confidence, income, wealth.
Supply
_______ SHOCKS: price fluctuations on items such as food and oil.
Escalator
_______ clauses are designed to adjust payments or wages for changes in the price level. Examples: - Commercial rental agreements - Labor union contracts - Social Security payments
Structural, demand, technology
_______ unemployment is caused by changes in consumer ______ or ______ (usually lasts longer).
Debtors (borrowers)
________ benefit from unanticipated inflation because the real value of their fixed payments falls over time as their wages rise with inflation.
Hyperinflation
________ is an EXTREMELY HIGH rate of inflation (at least 100% per year).
Socioeconomic
_________ reasons: more WOMEN working; delayed retirement
True
The official U.S. unemployment rate does not account for - marginally attached workers: those who actively looked for work in the past 12 months but not in the past four weeks. - discouraged workers: the portion of marginally attached workers who have given up actively looking for work. - underemployed workers: those working part-time for economic reasons (Uber, Lyft) and seeking a better job.
Consumer Price Index, Personal Consumption Expenditure, GDP Deflator, and Producer Price Index
Inflation can be measured by all of the following
Market Basket, Increase
Inflation is measured against a ______ _____. Some prices rise and some fall. But overall, the price level _____.
True
Inflation measures changes in the cost of living. Causes include 1. DEMAND FACTORS: consumer confidence, income, wealth. 2. SUPPLY SHOCKS: price fluctuations on items such as food and oil. 3. GOVERNMENT POLICY: its ability to borrow and print money
increases, decreases
Other things equal, if a recession gets worse, the number of discouraged workers _____, and the number of those in the labor force _____.
product substitution, better quality
PCE accounts for ____ _____ and ____ ____. - PCE adjusts the weights for goods. - PCE uses sales data. - Used by the Federal Reserve
4
People are counted as unemployed if they do not have a job but are available for work and have been actively seeking work for the previous _____ weeks.
decline, fall
People living on fixed incomes see their purchasing power ______ with inflation. -Creditors (lenders) see the real value of their loan repayments _____.
Real = Nom / Def
Real GDP Formula
109.2
Suppose a basket of goods and services has been selected to calculate the CPI and 2002 has been selected as the base year. In 2002, the basket's cost was $50; in 2004, the basket's cost was $52; and in 2006, the basket's cost was $54.60. The value of the CPI in 2006 was ____.
True
The labor force is constantly changing. - Population growth: overall rise in the number of available workers - Demographic changes: average age of population; birth rates; immigration - Socioeconomic reasons: more women working; delayed retirement - Economic conditions: more discouraged workers; workers going back to school
a discouraged worker
What is a person's classification if he or she has GIVEN UP actively looking for work?
GDP Deflator
What is the BROADEST measure of inflation in the national income and product accounts
hyperinflation
What macroeconomic condition is described in the article of a newspaper "The official data cited by Credit Libanais shows that food and clothing COSTS SURGED 190% and 172% respectively in May from a year earlier. Other reports show similar stats early this month."