Chapter 22 Macro Economics
If the CPI was 207 in 2007 and 225 in 2011, what pay raise would someone who earned $50,000 in income in 2007 have to receive in order to keep her purchasing power constant in 2011?
$4,348
Unanticipated deflation __________.
hurts borrowers
Which of these factors can cause the natural rate of unemployment to change?
Demographic changes
A sustained decrease in the average level of prices in the economy is __________.
called deflation
At full employment, __________.
cyclical unemployment is zero
The consumer price index is an index computed using prices of a __________.
fixed basket of goods and services purchased by the typical consumer
The short-term unemployment that arises from workers, in the process of changing jobs, is called __________.
frictional unemployment
The ratio of the labor force to the adult population is known as the:
labor force participation rate
The unemployment rate in the United States is usually __________ than the unemployment rates in most European countries, partly because the United States has __________ generous benefits for the unemployed.
lower, less
The output gap is the difference between __________.
potential GDP and actual GDP
The history of hyperinflations includes __________.
recent events. Hyperinflations have occurred in recent times as well as the past
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and job requirements is called __________.
structural unemployment
Which of these groups is included in the labor force?
the unemployed
The natural rate of unemployment is the __________.
unemployment rate an economy will experience when real GDP equals potential GDP
Of the eight categories in the CPI market basket, which three categories make up more than 70% of the basket?
Housing, transportation, and food
Suppose you are available for work but have not looked for a job for at least the last four weeks because you believe that no jobs are available. You would then be counted as __________.
a discouraged worker
Suppose the CPI in 2008 was 215.3 and the CPI in 2009 was 214.6, what was the inflation rate between 2008 and 2009?
-0.3 percent
If the cost of a market basket of goods in 1992, the base year, is $200, and the cost of the same market basket is $300 in 2008, what is the CPI in 2008?
150
Which of these persons is officially unemployed?
A non-working individual who has looked for a job in the past week
When the economy is at full employment, which types of unemployment remain?
Frictional and structural
Government policies can help to reduce the levels of frictional and structural unemployment, but they can also help to increase them. Which of these policies can cause an increase in the levels of frictional and structural unemployment?
Increasing the minimum wage
Which of these are included in the labor force?
Those who are employed and those who are unemployed
The unemployment that occurs with the normal workings of the economy, such as workers taking time to search for suitable jobs and firms taking time to search for qualified employees, is called:
frictional unemployment
The "normal or natural" underlying level of unemployment in the economy is the __________.
full employment rate of unemployment
A firm that pays an efficiency wage is paying a wage that is __________ the current market wage.
higher than
If the minimum wage is set above the market-determined equilibrium wage, the natural unemployment rate will be __________.
higher than it would be without a minimum wage
A sustained increase in the overall level of prices is known as:
inflation
If the inflation rate is low, steady, and anticipated, __________.
inflation may not be a major problem
The percentage rate of change in the price level is the definition of the:
inflation rate
If inflation is anticipated, __________.
it costs less to society than if unanticipated
In calculating the CPI, the __________.
market basket does not include large equipment purchased by firms
The consumer price index __________.
measures the average of prices paid by urban consumers for a fixed basket of consumer goods and services
Many economists believe the CPI __________ inflation because it fails to consider quality improvements in products.
overestimates
If the consumer price index was 73 in 1979 and 225 in 2011, then prices in 2011 were on average:
three times as high as 1979
What is the impact of unanticipated inflation?
Unanticipated inflation creates arbitrary redistributions of income.
Which one of these groups is most hurt by unanticipated inflation?
Wealthy people who hold cash in their wall safes