Econ CH 9 Unemployment & Inflation

Show how data on nominal wages for 2004 to 2011 and data on the CPI for the same years can be used to calculate the Real wage for these years?

(Nominal wages/Price Index) x 100 = Real wages Nominal wages divided by Price Index multiplied by 100 equals real wages.

What has the BLS done to reduce the size of biases in the CPI?

3

Which of the following steps have NOT been taken by the Bureau of Labor Statistics to reduce the size of biases in the CPI?

BLS has expanded the number of stores it collects the price info to reduce the coverage bias

Which is NOT accurate given the unemployment avgs in groups?

Black teenagers as a group have a lower unemployment rates than white teenagers.

Difference in CPI and PPI

CPI is the avg price of goods and services purchased by the typical urban family of 4, PPI is the avg of prices recvd by producers of goods and services at all stages of the production prcess.

Price index that is used to measure changes in the cost of living

Consumer Price Index

all of following are true except

Costco and walmart have the same cust pool and charge same price.

Not used in calculating the Consumer Price Index

Coverage Bias

If the unemployment level of men exceeds that of women, it follows the unemployment rate for men will be higher than the unemployment rate for women. This claim is

FALSE

What is NOT a measure of the price level

Govt price index

In Obama's statement..."..Even though the economy is changing and we have created jobs, we still face tough times;.. Which is the correct statement?

He was referring to the slow job growth in the economy in 2011.

Between Dec 2001 and Jan 2002, the total num people employed and the unemployment rate both fell. How is this possible?

It is possbile if labor participation rates also fall.

The labor force participation rate Formulae

Labor Force Participation Rate= (Labor force/Adult population) X 100

Difference between Nominal Interest Rate and Real Interest Rate s

Nominal is stated and the Real is Nominal minus Inflation

Inflation rate is the % increase in the price level from the

PREVIOUS year. NOT base year

All are problems in measuring the unemployment rate EXCEPT

People in active military service are included as unemployed

All of the following are biases in calculating the CPI

Substitution bias, increase in quality bias, new product bias and outlet bias.

Which is an accurate description of the household survey and the establishment survey

The household survey interviews households and measures the unemployment rate, where the establishment survey interviews businesses & measures the employment rate.

The household survey shows that the total number of people employed increased, yet the unemployment rate stayed the same. Shouldnt the unemployment rate fall when the num of people employed increases?

The unemployment rate remained the same bc both the number of employed and unemployed increased proportionally.

What is NOT one of the conditions one must meet to be considered unemployed

They had worked only one hour per week during the previous 4 weeks

The Ford Motor Co employed few people than it did in 2011 than they did in 1980

This decline in employment is a combo of frictional, structural and cyclical unemployment

Where there are part time workers the official BLS measure of the unemployment rate

UNDERSTATES the true degree of unemployment

The unemployment rate formula

Unemployment rate=(Unemployed/Labor force)X100

The fundamental difference between those who are unemployed and those classified as not being in the labor force is that the latter are not

activly searching for work.

When an unemployed person drops out of the labor force, it

does NOT affect the employment population ratio

When employed individuals become unemployed the civilian labor force

does not change

If the firms mngrs do not currently face a workers shortage, to justify the wages hike...

efficencny wages are designed o increase worker productivity.

If Congress eliminated the unemployment ins system, the level of

frictional unemployment would decrease.

The "share of adults with jobs" is known formally as the employment-population ratio. the employment population ratio provides the best summary of the state of the job market rather than the unemployment rate, bc it measures the fraction of the population that

has jobs

Currently the Bureau of Labor Statistics does NOT include homemakers in its employment and and labor force totals. What would happen to the unemployment rate and the Labor Force Participation rate if homemakers were included in these numbers?

he unemployment rate would Decrease and the labor force participation rate would iincrease.

The govt set min wage to .25 in 1938. This wage was

higher than equilibrium wage since min wages are binding price floors and are usually set above the equil rate

if the length of time workers are eligible to receive unemployment ins payments double, then the unemployment rate will

increase

Govt Unemployment insurance tends to

increase the unemployment rate by lowering opportunity cost of job search.

efficiency Wage

increases the unemployment rate since firms pay a higher than market wage that increases the qty of labor supplied

Using Fred the employment data chart shows

mothly report on thousands of persons

The difference in Real variable and a Nominal variable.

nominal variables are calculated in current year prices. Real variables are measured in dollars of the base year to adjust for the effects of inflation.

The minimum wage law

only has a small effect on unemployment

The employment- population ratio measures the

percentage of the working age population that is not employed.

The payment of govt unemployment insurance reduces the severity of recessions by

preventing a huge drop in income and spending for the unemployed.

The effect of labor unions on unemployment is

small since only there is a small percentage of labor force unions

IN calculating the CPI for the year, the BLS uses the qtys in the market basket rather than qtys purchased the current year. This gives rise to

substitution bias.

If a company offers a new phone with more features but sells the phone for the same price as the previous model, what happens to the CPI

the CPI does not change. If the quality of the goods changes but the price does NOT change. it will not affect the CPI Since the quality improved and the price did not, there is NOT a quality bias.

Many economists perfer

the establishment survey bc it is determined by actual payroll records rather then unverified answers.

If Congress eliminated the unemployment ins system

the level of REAL GDP will increase due as frictionally unemployed take less time to search for jobs

The unemployment rate is lower here than in CA bc

the oportunity cost is is lower in CA and they search longer for jobs

The reason behind the decline in employment (Ford Motor Co) could be all except

this is the normal underlying level of unemployment in the economy.

When an unemployed person drops out of the labor force, the unemployment rate

understates the true degree of joblessness in the economy.

The elimination of unemployment ins

will reduce workers incomes and their consumption spending thus lowering economic well being.

If this proposal were enacted the unemployment rate in France

would go up since the opportunity cost of job search would decrease