Econ 201 Assignment 7
Real Gross Domestic Product is
the value of total production linked back to the prices of a single year.
The employment-to ratio is defined as
total employment divided by the workers-age population then multiplied by 100
The ______ is calculated as the number of people ______ divided by the labor force multiplied by 100.
unemployment rate; unemployed
The Consumer Price Index is a measure of the average of the prices paid by ________ for a fixed basket of consumer goods and services
urban consumers
The labor force is defined as
workers with jobs and unemployed workers
In a country with a working-age population of 130 million, 90 million workers are employed and 10 million workers are unemployed. What is the unemployment rate?
10%
Suppose there are currently 100 people unemployed, 1500 people employed, and 2000 people in the working age population. The labor force participation rate equals 100 times
1600/2000.
Year Price index Inflation rate (percent) 1 100 2 117 A 3 125 B 4 120 C 5 D 8.3 6 150 E In the table above, what inflation rate belongs in space A?
17%
If the CPI basket of goods cost $200 in the reference base period and $450 in a later year, the CPI in the later year equals
225
Question Year---- Nominal Income-- Price Index 1990---- 9800-------- 99 1991---- 10000-------- 95 1992---- 15000------- 100 1993---- 17000------- 110 1994---- 23000------- 115 1995---- 33000------- 123 Calculate the change in inflation, nominal income, and real income from 1990 to 1995
24%, 237%, 171%
If the number of people unemployed is 100, the number of people employed is 1000, and the working-age population is 1400, then the unemployment rate is
9.1%
Which type of price index theory averages the base year and current year's quantities?
Fisher's Mean
Which type of price index theory uses base year's quantities?
Laspeyres
Which type of price index theory uses current year's quantities?
Paasche
Suppose the Consumer Price Index is 143.6. What does that number mean?
Prices rose 43.6 percent over the reference base period, on average.
Which of the following statements is INCORRECT?
The working age population includes everyone over the age of 16.
Suppose the CPI last year is 121 and the CPI this year is 137. The correct method to calculate the inflation rate is
[(137 - 121)/121] × 100 = 13.2.
Cyclical unemployment occurs when
a business cycle recession decreases employment
An example of "investment" in computing real GDP using the expenditure approach is the purchase of
a new set of tools by an auto mechanic, for use in repairing cars.
Deflation represents:
a reduction in the aggregate price level.
Discouraged workers ________ counted as officially unemployed because they ________.
are not; are not actively seeking work
The consumer price index (CPI)
compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period.
Unemployment caused by the fluctuation of the business cycle is called ________ unemployment.
cyclical
When a student finishes college and begins looking for work
frictional unemployment increases
The three types of unemployment are
frictional, structural, and cyclical.
Because of a bank merger, Ms. Davis lost her position as Vice President and had to seek work with other banks. Ms. Davis has the skills necessary to find a new job, thus she is best considered as
frictionally unemployed
As currently calculated, the CPI tends to overstate the true inflation rate because
it fails to correctly measure quality changes for some products.
The labor force participation rate is calculated as the
labor force divided by the working age population then multiplied by 100.
Because of the biases in calculating the CPI, actual inflation is
less than the measured inflation rate by about 1 percent per year.
The biases in the CPI include the
new goods, quality change, and substitution biases.
Frictional unemployment comes about because of
normal labor market turnover.
Marginally attached workers fall into which of the following population categories?
not in the labor force
During a recession, the ________.
number of marginally attached workers increases
Price indexes can overstate inflation because they
omit some quality improvements.
The unemployment rate measures the percentage of
people in the labor force who can't find a job
The currently used method for calculating the CPI
probably overstates inflation by about 1 percentage point.
Ms. Krupsky has shorthand and typing skills and still finds herself unemployed. In today's economy, Ms. Krupsky is an example of what type of unemployment?
structural unemployment
When the automobile replaced horse-drawn carriages as the principal means of transportation, firms producing horse-drawn carriages went bankrupt and permanently laid off all their workers, thereby increasing
structural unemployment
Substitution bias in the CPI refers to the fact that the CPI
takes no account of the substitution of goods by consumers when relative prices change.
Looking at inflation rates in the United States since the 1970s we see that
the 1970s experienced the highest inflation rates.
