ECON- test 3

Suppose a labor market is described by the demand equation, Qd = 80 - 2w, and the supply equation,Qs = -10 + w, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor(in Million), and w is the wage (in dollars). What is the equilibrium wage? [Round to the nearest dollar.]

$30

how to calculate labor force participation rate

(employed+unemployed)/(working age population) x 100

how to calculate the unemployment rate

(unemployed)/(labor force) x100

labor market dynamics

-5 million people in the U.S. start a new job each month and over 5 million people leave jobs in the U.S.

job stats in 2021

-75.4 million hires - 69.0 million separations - Net employment gain: 6.4 million -The civilian population in the U.S. is a about 261million. - More than 25% of the civilian population goes in and out of a job each year!

job creation

-Vacancies are an important component of the labor market -People also move in and out of jobs and in and out of the labor market every day. -While most unemployment spells are short, discrimination and skill loss make it hard for some people to find work.

Inflation

-a generalized rise in the overall level of prices. -decline in the purchasing power of money

Consumer Price Index (CPI)

-an index that tracks the average price consumers pay over time for a representative "basket" of goods and services. -closely watched indicator

social costs of unemployment

-its isolating and painful -long term unemployment affects Life expectancy, morbidity, clinical depression -Children whose parents experience unemployment tend to have Worse academic, mental, and future economic outcomes

causes of structural unemployment

-when wages are unable to fall to the market-clearing wage. This creates a labor surplus. -In a well-functioning labor market, equilibrium occurs where labor supply equals labor demand and no structural unemployment exists.

causes of frictional unemployment

1. Job-search resources 2. Skills mismatch /geographical mismatch 3. Unemployment insurance and other income support

Suppose a labor market is described by the demand equation, Qd = 80 - 2w, and the supply equation, Qs = -10 + w, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor(in Million), and w is the wage (in dollars). If the government institutes a minimum wage of $35, how many workers will be employed in this market?

10 million

Suppose a labor market is described by the demand equation, Qd = 80 - 2w, and the supply equation,Qs = -10 + w, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor(in Million), and w is the wage (in dollars). If the government institutes a minimum wage of $35, how many workers will be unemployed?

15 million

Suppose a labor market is described by the demand equation, Qd = 80 - 2w, and the supply equation, Qs = -10 + w, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor (in Million), and w is the wage (in dollars). What is the equilibrium quantity of labor?

20 million

Suppose a labor market is described by the demand equation, Qd = 80 - 2w, and the supply equation,Qs = -10 + w, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor(in Million), and w is the wage (in dollars). If the government institutes a minimum wage of $25, how many workers will be willing to work in this market?

20 million

Suppose a labor market is described by the demand equation, Qd = 80 - 2w, and the supply equation,Qs = -10 + w, where Qd is the quantity demanded of labor (in Million), Qs is the quantity supplied of labor(in Million), and w is the wage (in dollars). If the government institutes a minimum wage of $35, how many workers will be willing to work in this market?

25 million

Aiden recently graduated from college without a job.He hasn't started looking for one yet, but he plans to start searching for a job next month after he has moved back to his family's house and had time to catch up with his friends.Aiden is considered A. employed. B. unemployed. C. not in the labor force.

A

Boris just finished an economics degree and wants tolive in Washington, D.C., where there are many jobopenings matching his skills and education. He moves to D.C. without a job and crashes on a friend's couch while looking for one.Boris is considered A. frictionally unemployed. B. structurally unemployed. C. cyclically unemployed

A

Chelsea was a manager at a vinyl records store who recently quit because she felt the recent popularity of vinyl is a current fad that will eventually fade away.She is now actively looking for a job in the hospitality industry. Chelsea is considered: A. frictionally unemployed. B. cyclically unemployed. C. not in the labor force. D. structurally unemployed

A

If the price of a bundle of goods used to calculate the consumer price index rises from $80 to $86over a one-year period, what is the inflation rate for that year? A. 7.5% B. 10% C. 6.0% D. 6.9%

A

Indeed.com improves its algorithms so that job seekers can more easily find jobs that match their skills. This will likely reduce A. frictional unemployment. B. structural unemployment. C. cyclical unemployment.

A

Suppose that the consumer price index in Richland rises from 150 to 159 over the past year, and that the city sets its car registration prices so that real prices stay the same. If the cost to register a car was $50 last year, how much would it cost this year, in nominal terms? A. $53 B. $59 C. $50 D. $56

A

Suppose you were being paid $50 per hour for a monthly salary of about $8,000. You got a raise for$52.5 per hour for a monthly salary of $8,400. If the CPI price level increased from 300 to 315, what was the increase in your real wage (in %)? A. 0.0% B. 2.5% C. 5.0% D. 10.0%

A

The town of Fincastle has 250 working-age adults, of whom 200 are employed and 25 are unemployed.The labor force participation rate is A. 90%. B. 11%. C. 80%. D. 10%.

A

producer price index (PPI)

A price index that tracks the price of inputs into the production process.

GDP deflator

A price index that tracks the price ofall goods and services produced domestically.

Outlet Substitution Bias

As the structure of retailing changes, people switch to buying from cheaper sources, but the CPI, as measured, does not take account of this outlet substitution

indexation

Automatically adjusting wages, benefits, tax brackets, and the like to compensate for inflation

A popular teacher hands out candy bars to her students as an incentive for good behavior. If students choose to, they could then trade one candy bar for a sheet of stickers or two candy bars to skip a quiz. In this classroom, the teacher is using candy bars as a form of: A. barter. B. commodity money. C. fiat money. D. yummy money.

B

If an economy has a positive output gap of 3%, this means: A. unemployment is 3% above the natural rate of unemployment. B. GDP is 3% above potential GDP. C. inflation is 3% above the long-run rate of inflation. D. GDP is 3% below potential GDP.

B

If the economy had a real GDP of $16 trillion and a nominal GDP of $18 trillion, what would be the value of the GDP deflator? A. 88.89 B. 112.5 C. 2 D. 0.113

B

Suppose Robert got a loan in 1999 for $10,000. IfRobert agreed to a 5% nominal interest rate over the next 10 years and the economy experienced an inflation rate of 3%, what would Robert's real interest rate be? A. 8% B. 2% C. -2% D. 5%

B

Suppose that an economy is overheating. You would expect to see the unemployment rate: A. rise above the equilibrium unemployment rate. B. fall below the equilibrium unemployment rate. C. be equal to the equilibrium unemployment rate. D. be zero.

B

Suppose that the CPI in 2013 was 250 and theCPI in 2014 was 260. What is the rate of inflation in this economy? A. 3.8% B. 4.0% C. 10.0% D. 96.2%

B

The town of Fincastle has 250 working-age adults, of whom 200 are employed and 25 are unemployed.The unemployment rate is A. 90%. B. 11%. C. 80%. D. 10%

B

You are a buyer at an auto factory that is facing rising input costs. You manager asks you to determine if your competitors are also experiencing rising input prices. Which measure of prices should you use? A. CPI B. PPI C. core inflation D. GDP deflator

B

You predict that the output gap will decline from 1%to -1%. If the current unemployment rate is 3.5%,you predict the unemployment rate to A. fall to 2.5%. B. rise to 4.5%. C. stay at 3.5%. D. rise to 5.5%.

B

According to Okun's rule of thumb, for every 1% fall in the actual output below potential output, the unemployment rate: A. rises by 1%. B. falls by 1%. C. rises by 0.5%. D. falls by 0.5%

C

Box office take for Star Wars was $307M in 1977.The CPI was 60.6 in 1977. It is 271.0 in 2021. What is the value of the box office take in 2021dollars? A. $307M B. $937M C. $1,373M D. $1,071M

C

Box office take for The Force Awakens was $937M in 2015. The CPI was 237.0 in 2015. It is 271.0 in 2021. What is the value of the box office take in 2021 dollars? A. $307M B. $937M C. $1,373M D. $1,071M

C

From 2015 to 2016, the overall price level rose from 200to 220. Over the same period, tuition rates at the local community college rose from $100 to $115 per credit hour. What can be concluded from the rise in tuition relative to overall inflation? A. Tuition rates increased at the same rate as inflation. B. Tuition rates increased at a slower rate than inflation. C. Tuition rates increased at a faster rate than inflation. D. Tuition rates and inflation cannot be compared with the numbers given

C

In the third quarter of 2019, real potential output was$18,964 billion while real GDP was $19,121 billion.What is the output gap? A. $157 billion B. -$157 billion C. 0.83% D. -0.83%

C

Netanya owns a consulting business. During a severe downturn in the economy, she has to fire several of her analysts. Netanya's analysts are considered A. frictionally unemployed. B. structurally unemployed. C. cyclically unemployed.

C

Which of the following persons would be considered employed? A. Sam, a 12 year old who helps his mom stock shelves at her gift shop. B. Ron, a recently enrolled full-time college student in hopes of finding a well-paying job. C. Jennifer, a teacher who is on two-month maternity leave but will return to work. D. All of the above persons are considered employed

C

Okun's rule of thumb

Cyclical unemployment = - (1/2) * Output gap

An economy's potential output level is: A. the output when unemployment is zero. B. equivalent of the GDP at current market value. C. the level at which no resources are available in the economy. D. the output that is possible when all resources are fully employed at their sustainable levels.

D

If the village of Happyville has 150 residents, of which 50 are children, 95 are working, and 5 are actively seeking work, the unemployment rate is:The unemployment rate is A. 3.3%. B. 36.7%. C. 33.3%. D. 5%.

D

Instead of the consumer price index, theFederal Reserve uses the _____, which allows for substitution because it is not based on a fixed basket of goods. A. GDP deflator B. core inflation C. producer price index (PPI) D. personal consumption expenditure (PCE)deflator

D

Suppose that due to a poor economy, 1 million workers lost their jobs, causing the unemployment rate to increase to 10%. After a few months of searching, 300,000 of these unemployed workers give up looking for work. How would the decision by these 300,000 people affect the unemployment rate, all else equal? A. There is not enough information to answer this question. B. The unemployment rate would remain unchanged. C. The unemployment rate would increase. D. The unemployment rate would decrease

D

Suppose the consumer basket was set to include one rent payment and four sets of groceries. In January, rent was on average $1,100 a month and a set of groceries was$95. In February, the rent was on average $1,200 and groceries were $90 a set. What was the inflation rate fromJanuary to February? A. 9.09% B. 5.55% C. 7.94% D. 5.41%

D

The business cycle refers to the: A. rise and fall of business revenues over time. B. long-term trends in economic growth. C. increases in GDP above potential GDP. D. short-term fluctuations in economic activity.

D

Which of the following forms of money would best represent fiat money? A. A rare baseball card given to a landlord in place of rent. B. An hour-long golf lesson given in exchange for an hour of tutoring in economics. C. Silver quarters made prior to 1965. D. A $20 bill printed in 2015.

D

Which of the following persons would be considered unemployed? A. Nick, a union member on strike at his factory because he demands better job benefits. B. Beth, laid off from her job as a mechanic, chose to return to school instead of looking for another job. C. Jack, not having worked in eight months, feels hopeless, which is why he does not bother applying for jobs. D. None of the above are considered unemployed

D

seasonally adjusted data

Data stripped of predictable seasonal patterns, helping us to spot changed in the underlying trends

New Goods Bias

New goods that were not available in the base year appear and, if they are more expensive than the goods they replace, they put an upward bias into the CPI.

Phases of the business cycle

Peak: A high point in economic activity Trough: A low point in economic activity Recession: A period of declining economic activity Expansion: A period of increasing economic activity

Quality Change Bias

Quality improvements occur every year. Part of the rise in the price is payment for improved quality and is not inflation.The CPI counts all the price rise as inflation.

underemployment

Someone who is working but wants more hours or whose job isn't adequately using their skills.

involuntarily part-time

Someone who is working part-time but wants full-time work.

marginally attached

Someone who wants a job, has looked in the past year, but isn't actively seeking work.

money illusion

The (mistaken) tendency to focus on nominal dollar amounts instead of inflation-adjusted amounts

commodity substitution bias

The market basket of goods used in calculating the CPI is fixed and does not take into account consumers' substitutions away from goods whose relative prices increase

working age population

The total number of people aged 16 years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.

what inflation measure do forecasters use?

They use core inflation, which excludes food and energy.

cyclical unemployment

Unemployment that is due to a temporary downturn in the economy

frictional unemployment

Unemployment that is due to the time it takes for employers to search for workers and for workers to search for jobs

structural unemployment

Unemployment that occurs because wages don't fall to bring labor demand and supply into equilibrium.

lagging indicators

Variables that follow the business cycle (GDP) witha delay

leading indicators

Variables that tend to predict the future path of the economy (GDP)

interdependence principle

When one part of the economy is doing well, it is likely that other parts of the economy are also doing well.

efficiency wages

a higher wage paid to encourage greater worker productivity, can cause structural unemployment and lower total labor costs.

Hyperflation

a very high rate of inflation

Aiden recently graduated from college without a job.He hasn't started looking for one yet, but he plans to start searching for a job next month after he has moved back to his family's house and had time to catch up with his friends.Aiden is considered A. employed. B. unemployed. C. not in the labor force.

c

annualized rates

data converted to the rate that would occur if the same growth rate had occurred throughout the year, used for analysis

True or false: Only fiat money, as opposed to barter and commodity money, serves all three functions of money (unit of account, medium of exchange, store of value). A. True B. False

false

calculate inflation rate

inflation rate=((price this year-price last year)/price level last year)x100

Positive output gap

means actual output is above potential output:the economy is using its resources with intensity.

functions of money

medium of exchange: money is used to buy goods and services unit of account: money is a common unit used to measure economic value store of value: money can be saved

fisher equation

real rate= nominal rate- inflation rate

output gap equation

the difference between actual and potential output, measured as a percentage of potential output (in %): equation: ((actual aggregate output - potential output)/potential output) X 100

potential output

the level of output that occurs when all resources are fully employed at their sustainable levels.

equilibrium unemployment rate

the long-run unemployment rate to which the economy tends to return. *Natural Unemployment Rate = Frictional + Structural

labor force

the sum of the amount of people employed and unemployed.

employed

those who are working-age people who work a job.

inflation adjustment formula

todays dollars= another times dollars x (price level today/price level over time)

True or false: Fiat money allows for easier transactions in both, physical and electronic forms, than commodity money does. A. True B. False

true

Hysteresis

when a period of high unemployment leads to a higher equilibrium unemployment rate.

Negative output gap

when actual output is below its potential: there are idle resources, and it typically corresponds with high unemployment.

relative price increase vs. inflation

with relative price increases all other prices stay the same, while with inflation there is a general price increase

unemployed

working-age people who are trying to get jobs. must be actively seeking work and would be able to accept a job if offered one.