CH13-HW ECO
Price indexes can be used to compare prices across different periods. Suppose that a year of tuition for college at public institutions averaged a cost of $1 comma 843 in 1989 and that the CPI index was 125 in 1989. If the CPI index was 221 in 2009, then the cost of tuition in 2009, as the result of inflation, would equal $________. (Enter your response rounded to the nearest whole number.) Suppose that the actual average cost of tuition in 2009 was $7 comma 045 . Relative to the expected cost computed above, the cost of tuition increased by _____________ the amount of inflation.
$3258 More Than
In 1924, the famous novelist F. Scott Fitzgerald wrote an article for the Saturday Evening Post titled "How to live on $36,000 a Year," in which he wondered how he and his wife had managed to spend all of that very high income without saving any of it. In 1924, the consumer price index (CPI) was 17, and the CPI in 2012 was 230. Source: F. Scott Fitzgerald, "How to live on $36,000 a Year," Saturday Evening Post, April 5, 1924. The income you would have needed in 2012 to have had the same purchasing power that Fitzgerald's $36,000 had in 1924 is $______.
$487059
Suppose you were borrowing money to buy a car. Situation-1: Suppose the interest rate on your car loan is 18% and the inflation rate 17%. Calculate the real interest rate _____% Situation-2: Suppose the interest rate on your car loan is 8% and the inflation rate is 5%. Calculate the real interest rate _____% Situation 1 will be _______ Situation 2 because the _______ is lower. Now suppose you are JPMorgan Chase, and you are making car loans. Which situation above would you now prefer? JPMorgan Chase would prefer ________.
1) 1% (18-17) 2) 3% (8-5) 3) Situation-1 will be better than Situation-2, because the real interest rate is lower 4) Situation 2
In August 2013, the working-age population of the United States was 245.9 million. The working-age population is divided into those in the labor force (155.5 million) and those not in the labor force (90.4 million). The labor force is divided into the employed (144.2 million) and the unemployed (11.3 million). Those not in the labor force are divided into those not available for work (84.1 million) and those available for work (6.3 million). Finally, those available for work but not in the labor force are divided into discouraged workers (0.9 million) and those currently not working for other reasons (5.4 million). Use this data to help determine which one of the following statements is true:
Both A & B are true. A) The unemployment rate is (11.3 million/155.5 million) x 100 = 7.3% B) The labor force participation rate is (155.5million/ 245.9 million) x 100 = 63/2%
The price index which is used to measure changes in the cost of living is the
Consumer Price Index (CPI)
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. Your answer is correct. It does not include information about self-employed people
Which of the following best describes a current trend in the labor force participation rate?
It is decreasing for men and increasing for women.
In his 2015 State of the Union address, President Barack Obama observed that "over the past five years, our businesses have created more than 11 million new jobs." Source: Barack Obama, "Remarks by the President in State of the Union Address," whitehouse.gov, January 20, 2015. Is it likely that the U.S. economy created only 11 million jobs during this time period?
No, the economy could have created more jobs, but some were also lost during that period.
Which of the following is the correct formula for calculating the unemployment rate?
Number of unemployed / Labor force x 100
Which of the following can give an early warning of future increases in the price level?
Producer price index
Bob Wesley believes that structural unemployment should be eliminated in order for an economy to be healthy. In making this argument, which of the following relevant issues is he ignoring?
Structural unemployment will exist in an economy that is innovative.
Relative to the household survey, which of the following is a strength of the establishment survey?
The establishment survey is determined by actual payrolls, rather than by the unverified answers of the household survey.
The natural rate of unemployment is
The sum of structural unemployment and frictional unemployment.
Currently, the Bureau of Labor Statistics does not include homemakers in its employment and labor force totals. What would happen to the unemployment rate and the labor force participation rate if homemakers were included in these numbers?
The unemployment rate would decrease and the labor force participation rate would increase.
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.
Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there aren't any jobs available. You would be counted as
a discourage worker
Even if they don't find a job right away, people entering the job market after graduating from high school or college will
be counted as part of the labor force by the BLS if they are actively looking for work.
The increase in labor turnover and the increases in entry-level wages being paid by large retailers are
connected because higher wages can encourage workers to stay longer, thereby lowering turnover rates
Discuss the likely impact of the following event on the unemployment rate. If the minimum wage is abolished, then the unemployment rate will
decrease
A person who is in between jobs but actively engaged in a job search is considered to be Experts in hand-drawn animation who remain unemployed due to the film industry's switch to computer-generated animation are considered to be When a company reduces production and employment during economic recessions, those employees who lose their jobs are generally considered to be
frictionally unemployed structurally unemployed cyclically unemployed
The chapter explains that it is impossible to know whether a particular nominal interest rate is "high" or "low" because
it all depends on the inflation rate.
The difference between a nominal variable and a real variable is that
nominal variables are calculated in current-year prices and the real variables are measured in dollars of the base year for the price index to correct the effects of inflation.
An article in the Wall Street Journal contained the following observation: "Every month, millions of workers leave the job market because of retirement, to care for children or aging parents, to pursue more education, or out of discouragement. Millions of others jump in after graduating." Source: Josh Zumbrun, "Labor-Market Dropouts Stay on the Sidelines," Wall Street Journal, December 28, 2014. The millions of workers leaving the job market for the reasons given are
not counted as unemployed in the BLS data because they are no longer actively looking for work.
Suppose that the only good you purchase is hamburgers and that at the beginning of the year, the price of hamburgers is $2.00. Suppose you lend $1,000 for one year at an interest rate of 12.1 percent. At the end of the year, hamburgers cost $2.14. Calculate the real interest rate on the loan. nothing %
people with incomes rising faster than the rate of inflation enjoy an increasing purchasing power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power.
In 2015, an article on bloomberg.com noted that Walmart, Starbucks, TJ Maxx, IKEA, Gap, and several other big retailers had announced increases in the wages they were paying newly hired workers. The same article also noted that "[labor] turnover in the retail sector has been steadily rising and now stands at 5 percent a month." Source: Kyle Stock and Kim Bhasin, "Why Retailers Are Suddenly Desperate to Keep Their Least-Valuable Workers," bloomberg.com, March 6, 2015. The term "labor turnover" used in the article means the
separation of an employee from an establishment.
The type of unemployment most likely to result in hardship for the people who are unemployed is
structural because this type of unemployment requires retraining to acquire new job skills.
Menu costs are The internet has _______ the size of menu costs.
the costs to firms of changing prices.
Why do economists believe that setting a goal of zero percent unemployment is not feasible or desirable? Creating a goal of zero percent unemployment for an economy is not feasible nor is it desirable because
the economy needs some short-term unemployment in order to allow for better matching of jobs with workers that possess the proper skill sets.
When the economy is at full employment, unemployment is equal to
the natural rate of unemployment.
The difference between the nominal interest rate and the real interest rate is
the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate.
What is the relationship between the unemployment rate and enacting or increasing a minimum wage? When a minimum wage is enacted or increased across a country, the unemployment rate
will increase some but the impacts will be much larger for some groups of workers.
A politician makes the following argument: "The economy would operate more efficiently if frictional unemployment were eliminated. Therefore, a goal of government policy should be to reduce the frictional rate of unemployment to the lowest possible level." Eliminating all frictional unemployment
will not be good for the economy since the presence of frictional unemployment increases economic efficiency.
The three types of unemployment are
frictional, structural, and cyclical unemploment.
