Week 7: Business Cycles, Unemployment, and Inflation
The causes of inflation are usually related to:
-changes in the money supply -economy-wide changes in demand or supply for goods and services
There are three types of unemployment
-cyclical -frictional -structural
The labor force does not include:
-individuals who are institutionalized -individuals who are under the age of 16
A discourage worker is:
-not a part of the labor force -someone who wants to work but is not actively looking for a job
Why is an unemployment rate of 0% not considered desirable?
-some structural unemployment indicates innovation and growth -some frictional unemployment is healthy as people move to new, better jobs
Considering the presidential electrons since 1948, data showed that a strong economy seemed to help the:
incumbent party
Economists define ___________ as a general increase in the prices of goods and services
inflation
Due to some illness, Sally is not able to look for jobs. Sally is
not in the labor force
The amount of goods and services that can be purchased with actual income is:
real income
The measure of the purchasing power of what you earn every month is:
real income
The National Bureau of Economic Research determines when _______ begin and end
recessions
A skilled glass blower becomes unemployed when a new machine does her job faster This an example of _______ unemployment
structural
Advances in technology make the assembly-line worker's job obsolete. This an example of _______ unemployment
structural
Hovana has a labor force of 150 million people, 15 million of whom are currently frictionally unemployed and another 5 million of whom are currently structurally unemployed. If Hovana's actual unemployment rate is 16.3 percent, you can conclude that
there is a recession
The National Bureau of Economic Research determines
when business cycles begin and end
Unemployment benefits have nothing to do with the unemployment calculations conducted by the Bureau of Labor Statistics
True
Natural rate of unemployment is calculated by
1. add the frictionally unemployed and the structurally unemployed 2. divide that by the size of the labor force 3. multiply by 100.
An economy operating at full employment does not employ ________ percent of workers in the labor force
100
Hovana has a labor force of 150 million people, 15 million of whom are currently frictionally unemployed and another 5 million of whom are currently structurally unemployed. The natural rate of unemployment is
13.3% ((15 million + 5 million)/150 million) * 100 =13.3%
The recession phase of business cycle is characterized as a decline in real output for at least __________ months
6
Janice is on sick leave from work. Janice is
employed
George, who laid off, is expecting to be rehired, but he is currently seeking a job in other firms as well. George is
unemployed
Percentage Change in Real Income
percentage change in nominal income - percentage change in price level (%∆Nominal Income - %∆Prices)
In the expansion stage of the business cycle, _____________ may be pushed upward due to increases in resource utilization and income
prices
____________ income measures the purchasing power of what you earn every month
real
A long-lasting and severe ________ is also known as a depression
recession
The _________ phase of the business cycle is characterized by full, or near-full, employment and real output that is at, or close to, an economy's full capacity
peak
Hovana has a labor force of 150 million people, 15 million of whom are currently frictionally unemployed and another 5 million of whom are currently structurally unemployed. Now suppose that Hovana's Bureau of Labor Statistics releases the newest numbers for the fictional and structural unemployment: 18 million and 7 million, respectively. What is Hovana's new natural rate of unemployment?
((18 million + 7 million)/150 million) * 100 =16.7%
Nominal incomes for two years are shown in the table below. Assume that Year 1 is the base year. Year Nominal income CPI 1 $48,000 100 2 $53,000 105 To the nearest dollar, the value of the real income in Year 1 is
(48,000/100)*100 = $48,000
Nominal incomes for two years are shown in the table below. Assume that Year 1 is the base year. Year Nominal income CPI 1 $48,000 100 2 $53,000 105 To the nearest dollar, the value of the real income in Year 2 is
(53,000/105)*100 = $50476.2
The labor force participation rate is:
(Labor Force/Population age 16 and up)*100 dividing the number of people actively participating in the labor force by the total number of people eligible to participate in the labor force.
Hovana has a labor force of 150 million people, 15 million of whom are currently frictionally unemployed and another 5 million of whom are currently structurally unemployed. Now suppose that in the following year, the number of employed increases to 200 million while the number of unemployed decreases to 10 million. What is Hovana's unemployment rate now?
4.8% (10 million/(200 million + 10 million))*100= 4.8%
Dan was recently laid off from his job. His boss told him that the slowing economy was to blame. Dan is _____ unemployed
cyclically
Real Income
[(Nominal Income/Consumer Price Index)*100]
Which of the following persons would not be considered unemployed?
a construction worker who has given up looking for work after 18 months without a job
To truly determine whether changes in the unemployment rate translate into improvements in labor and economic conditions, you have to look at the:
actual number of individuals employed and unemployed relative to the size of the labor force
Jim lost his sales job at the Mercedes dealership because times were tough and people could no longer afford luxury cars. Jim is _______ unemployed
cyclically
A medical doctor is working as a waiter. The doctor is
employed
Denise stays at home with her children but works as an accountant in a supermarket every Friday and Saturday. Denise is
employed
A group of workers at a furniture manufacturing plant quit their jobs because they want to live in another town. They start searching for work in the new town. These workers are _______ unemployed
frictionally
Jenny was not satisfied with her job in a hospital, so she left the job to find a new job in a health clinic. Jenny is _______ unemployed
frictionally
Juan recently graduated from college and is looking for his first job. Juan is _____ unemployed
frictionally
There will always be ______ unemployed workers searching for positions or in between jobs
frictionally
The U.S. Bureau of Labor Statistics uses the Consumer Price Index to track _________ over time
inflation
When calculating an ____________ rate, the most straightforward approach is to compare the price level in one year with the price level in the next year
inflation
Nominal income
is the actual number of dollars received in exchange for the different resources available in the economy
Real income
is the amount of goods and services that can be purchased with nominal income; the inflation adjusted measure of income
Cyclical unemployment
is the type that rises during economic downturns and falls when the economy improves; it is the extra unemployment that occurs during recessions
The unemployment rate is the proportion of the _____________ ___________ that is unemployed
labor force
A graph of the business cycle shows the:
level of real GDP on the vertical axis and time on the horizontal axis
The actual number of dollars received in exchange for the different resources available in the economy is:
nominal income
Alice, who has not worked in a year, took a resume-building workshop to help her prepare for a job search. Alice is
not in the labor force
In the past four weeks, Joe, who has not worked for two years, searched through some job listings online but did not see anything interesting. Joe is
not in the labor force
Stan is a student who will apply for a summer job but is currently in school. Stan is
not in the labor force
Structural unemployment
occurs because of a geographic or skill mismatch between workers and employers
Frictional unemployment
occurs when people take time to find a job; it is the short-term unemployment associated with the process of matching workers with jobs.
Many jobs are shifted from United States in Mexico because labor is available at lower wages in Mexico This an example of _______ unemployment
structural
Emma recently quit her job in San Diego to move to St. Louis to be closer to friends and family. She is currently working with a local employment agency to help her find a new job. Emma is _______ unemployed
structurally
General Motors lays of 5,000 workers and replaces the m with robots. These workers are ________ unemployed
structurally
Liz was working at a textile plant. Her employer now uses robots to do her job, and she is looking for another job. Liz is _____ unemployed
structurally
Hovana has a labor force of 150 million people, 15 million of whom are currently frictionally unemployed and another 5 million of whom are currently structurally unemployed. If Hovana's actual unemployment rate is 13.3 percent, you can conclude that
there is no cyclical unemployment
The _________ phase of the business cycle is characterized by employment and real output being at their lowest level within a cycle
trough
Jim is without a job is available to work and has actively looked for employment in the past four weeks. Jim is
unemployed
Now that the children are out of the house, a homemaker has been looking for part-time work four weeks. The homemaker is
unemployed
Roger, a 70-year-old retiree who has not worked for five years, has been looking for work again for the past two months. Roger is
unemployed
To be included in the labor force, someone needs to be:
working or actively searching for a job