econ102 hw2

When inflation is higher than expected, there is redistribution from:

Lenders to borrowers.

Which of the following is NOT a step in calculating the inflation rate from one period to the next?

Measure the change in quality of the products from one period to the other.

Which of the following lists the functions of money?

Medium of exchange, store of value, and unit of account

You make some new friends at a party. Which of your new friends described here is unemployed?

Melinda, who was recently laid off

The labor supply curve is positively sloped because:

More people are willing to work at high wages than at low wages.

The CPI changes from 100 to 125. This means that:

Overall prices are now 25% higher than they used to be.

Many payments made by the U.S. government—such as Social Security payments—are tied to the consumer price index. To the extent that the index is biased upward, use of the CPI:

Raises government expenditures.

Suppose that a CPI basket includes avocadoes, pineapples and oranges. Avocadoes become very expensive, and consumers substitute away from avocadoes and buy hummus instead. If the CPI basket does not change to reflect the move away from avocados, the result is:

Substitution bias

In 1971, the cost of a four-year college degree from a public university was about $1,410. The consumer price index was 40.48 in January 1971. If the current consumer price index is 251.1, what is the approximate cost of the four-year degree in current dollars?

$8,746

(Table: Labor Force Data) Suppose the labor force participation rate is 70%. The labor force is equal to _____ million.

105

In order to be considered unemployed, a person must:(i) be part of the working-age population.(ii) be actively looking for work.(iii) not have been self-employed.(iv) must be noninstitutionalized.

(i), (ii), and (iv)

Suppose that a market basket used to construct a university student price index (USPI) consists of 4 textbooks and 100 gallons of gasoline. In 2018, the base year, textbooks cost $100 each, and gasoline costs $2 per gallon. In 2019, textbooks still cost $100 each, and gasoline costs $3 per gallon. The USPI for 2019 is:

116.67

What is Costa Rica's GDP deflator if its nominal GDP is $60.13 billion (in current US$) and the real GDP is $49.17 billion?

122.3

In May 2019, there were approximately 68,980,000 people in Japan's labor force. About 1,650,000 people were unemployed. What was the unemployment rate?

2.4%

If the consumer price index is 120 in year 1 and 150 in year 2, then the rate of inflation from year 1 to year 2 is:

25%

If the population of the United States is 260 million, the labor force is 130 million, and 120 million workers are employed, the rate of unemployment is _____.

7.7%

In a 2011 to 2012 labor force survey, the working age population in Uganda was 15,764,000. The labor force was 12,623,000. What was the labor force participation rate in Uganda?

80.01%

Suppose that banks are issuing personal loans at 9%. If expected inflation is 3%, then the nominal interest rate is _____, and the real interest rate is _____.

9%; 6%

In the absence of a minimum wage, efficiency wages, or labor unions, a decline in the demand for labor will likely result in _____ if wages are flexible.

A lower level of employment but likely no change in the unemployment rate

A binding minimum wage in a labor market is set _____ the equilibrium wage and causes a _____ of job-seekers.

Above; surplus

During the Great Recession, the United States Congress increased the length of time that unemployment benefits could be received from 52 weeks to 99 weeks. This change caused:

An increase in the costs for the government.

To be counted as unemployed, one must:

Be currently not working, actively searching for work and able to accept a job if it were offered.

Cyclical unemployment is unemployment:

Due to a temporary downturn in the economy

Last week, Saanvi quit her job as a copywriter at an advertising agency. She has spent the past few days browsing the help-wanted ads but hasn't found anything that matches her skills. Saanvi is BEST classified as:

Frictionally unemployed

Following a significant recessionary period in which there were periodic wage freezes, workers negotiate higher wages. However, the higher wages lead to a decrease in the number of new workers getting hired, so unemployment persists in the region. The scenario described here is an example of:

Hysteresis

Structural unemployment is unemployment:

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

The inflation or deflation rate is

The change in a price index divided by the initial value of the index

Suppose that Akemi has an accounting degree, but she lost her job two months ago when her company merged with another firm. Akemi hasn't been able to find another accounting job, so she has taken a part-time job as a sales clerk at a clothing store. The Bureau of Labor Statistics classifies Akemi as:

Underemployed

Meredith has purchased a guaranteed income certificate (GIC) in Canada. This financial instrument pays her 1% interest per year. However, inflation during the same year is 2%. What was Meredith's nominal interest rate on her GIC?

not -1%

How does money illusion cause nominal wage rigidity?

not Money illusion leads to workers asking for fixed wage increases (and decreases) adjusted to the rate of inflation (or deflation).