Economics Midterm 2

Which item has the largest weight in the CPI basket?

housing

People who are working up to 34 hours per week but would like to work more are considered

involuntary part-time workers.

The CPI overstates inflation because the average consumer buys

less of those goods whose relative price has risen

In the United States, a reason for the increase of the labor force participation rate for women is that

more women pursued a college education and received higher wages upon graduation

When the economy is at full employment, the

natural unemployment rate equals the unemployment rate

If the CPI decreases from one year to the next, then the inflation rate is

negative.

Which of the following is a bias in the CPI?

new goods bias and commodity substitution bias

To be considered unemployed, a worker must have had

no employment during the week before the survey and be actively looking for a job.

Discouraged workers who are over 16 years old are

not counted as unemployed and part of the working-age population

The inflation rate measures the

percentage change in the CPI from one year to the next year.

Suppose the CPI for this year is 133.7. This number means that

prices rose 33.7 percent over the base year.

To find the cost of the CPI market basket in the current period we have to multiply the

quantities in the CPI market basket by the current period prices.

During a recession the unemployment rate generally ________ and during an expansion the unemployment rate generally ________.

rises; falls

As technology advancements have led to more white collar jobs

the labor force participation rate for women has increased over the last 50 years

Frictional unemployment is the result of

the normal process of jobs being created and destroyed

In 2020, real GDP in the United States was below potential GDP. This fact definitely means that

the unemployment rate was above the natural unemployment rate

A worker is considered part time if the worker

usually works less than 35 hours per week

One way to be classified as employed is by

working 1 hour per week at a paid job and working 15 or more hours as an unpaid worker in family business

If 160 million people are employed, 15 million people are unemployed, and the population is 280 million people, the unemployment rate is

8.6 percent.

Core inflation

excludes prices of food and energy.

The labor force participation rate is equal to

(labor force ÷ working-age population) × 100.

The value of the CPI for the reference base period is always

100

Suppose the working-age population is 500 million, the labor force is 200 million, and the unemployment rate is 15 percent. The number of unemployed people is

30 million

At full employment there is no

cyclical unemployment

Janae was fired from her job with Microsoft in the 2008-09 recession because Microsoft's sales dipped. Janae's unemployment would be best classified as

cyclical unemployment.

Which type of unemployment is the consequence of downturns in the business cycle?

cyclical

To find the cost of the CPI market basket in the base period prices we have to multiply the

To find the cost of the CPI market basket in the base period prices we have to multiply the

An example of the quality change bias, and not a new goods bias, in the calculation of the CPI is a price increase in

a 2020 smartphone versus a 2013 smartphone

Suppose that Mel (who is 27) is not working, but looked for a job as recently as 2 months ago. Mel would like a job and he is available for work. He is considered

a marginally attached worker.

A marginally attached worker is

a worker who does not have a job and is available and wants one but has not made any efforts to find a job within the previous four weeks.

The working-age population consists of all the people in the population

aged 16 and over who are not in jail, hospital, or an institution or in the U.S. Armed Forces.

Suppose higher prices lead consumers to switch from shopping at Abercrombie & Fitch to shopping at Walmart. If the CPI does not reflect this change, it is referred to as

an outlet substitution bias.

The CPI is a measure of the

average prices paid by consumers for a fixed basket of goods and services.

The CPI stands for

consumer price index

Cyclical unemployment is

created by a recession.

A weakness that could be noted about the unemployment rate is that it

does not account for the underutilization of workers.

The working-age population includes

employed and unemployed people over the age of 16.

Jane is a 25 year old, full-time student. She works part time in her school library and is paid $10 an hour. She is considered to be

employed.

Potential GDP is the level of output produced when the unemployment rate is

equal to the natural unemployment rate.

Unemployment benefits in western Europe are more generous than in the United States. As a result, ________ in the United States

frictional unemployment is lower

Unemployment benefits in western Europe are more generous than in the United States. As a result, ________ in the United States.

frictional unemployment is lower

Jordan recently quit her job as a marketing consultant in Washington, D.C. and is looking for a better-paying job with an advertising agency in New York. Jordan is considered to be

frictionally unemployed

Beth has just quit her job, moved to a new city, and is looking for a new job. Beth is

frictionally unemployed.

The unemployment rate measures the percentage of

people in the labor force who can't find a job.

During 2009, General Motors announced that it would close its Saturn facilities in the United States because of the foreign competition it faced. This corporate move

increased structural unemployment

During a recession, cyclical unemployment ________ and real GDP ________.

increases; decreases

Phillip is a 22-year old who has no job and is available for work, but has not actively looked for a job in the last month. The Current Population Survey identifies Phillip as ________, ________ the labor force, and ________ the working-age population.

not unemployed; not part of; part of

The labor force is the

number of employed people plus the number of unemployed people.

When the unemployment rate equals the natural unemployment rate, most likely the economy is producing

on the production possibilities frontier

An employee who is fired from his or her job because he or she lacks the skills required to accomplish the task, is part of ________ unemployment.

structural

Which type of unemployment arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs?

structural

Juan recently lost his job as a travel agent, which he has had for 20 years, because the demand for his services has fallen over time as more and more people book their vacations online. Unfortunately, Juan has not been able to find a new job because he lacks the skills needed to get hired in other industries where job growth is occurring. Juan is considered to be

structurally unemployed