Exam 2 // HW

GDP Grows... Faster/Slower? Investment

Faster

What does it mean to characterize prices as "sticky"?

Prices do NOT change very easily.

"Terrell does not have a job. For many years, Terrell's skills were highly desired and he had no trouble finding work. Terrell still has many of these same skills but he is finding that employers now desire different attributes in employees."

Structurally Unemployed

The natural rate of unemployment equals __________________.

frictional unemployment + structural unemployment

Employment Status? Bill Loney does not have a job nor does he intend to look for one.

Out of Labor Force

Employment Status? Brighton Early is a student. He has no job outside of the home, but spends 5 hours each week mowing the lawn and maintaining his yard. He's happy with his situation and isn't looking for more work.

Out of Labor Force

GDP Grows... Faster/Slower? Revolution

Slower

Unemployment due to the time workers spend searching for jobs

Frictional

When considering economic growth, many policy makers focus on real GDP per capita since it takes into account the potentially distorting effects of ______________ and ________________.

- inflation - population change

What kind of unemployment results from downturns in the economy?

Cyclical Unemployment

Increase OR Decrease the natural rate of unemployment? An increase in information about job opportunities

Decrease

Increase OR Decrease the natural rate of unemployment? More funding for gov't worker training programs

Decrease

Increase OR Decrease the natural rate of unemployment? Reducing workers' collective bargaining rights

Decrease

"Deron does not currently have a job. Many firms would like to hire him (in Dallas and Brooklyn in particular) but Deron remains out of work bc wants to find jobs that are the proper match."

Frictionally Unemployed

What kind of unemployment results from workers and firms not having perfect info about the state of the labor market?

Frictionally Unemployment

Economic growth occurs from increases in ______ over time

GDP

Increase OR Decrease the natural rate of unemployment? An increase in union membership

Increase

Chloe, age 17, is a full-time student and has no interest in working.

NONE

Is natural unemployment fixed?

No

Included/Not Included as input into the aggregate production function for GDP? - Bonds issued by automaker

Not Included

Included/Not Included as input into the aggregate production function for GDP? - Contributions to Social Security

Not Included

What kind of unemployment results from shocks in the economy that lead to changes in skills required by employers?

Structural Unemployment

Both the duration & size of unemployment benefits can increase the length of unemployment for a workers. The length of __________ is more important to the unemployed.

benefits

Which of the following is a source of sticky prices?

contracts

Both the _________ & _______ of unemployment benefits can increase the length of unemployment for a workers.

duration & size

"Abby is a stellar employee. However, her employer has gone out of business due to a recession and Abby has no job as a result. Abby will surely be able to find a job in the future but remains looking for a job currently."

Cyclically Unemployed

Encourage/Don't Encourage.... economic growth? Increase in tariffs (taxes on imports)

Discourage

Encourage/Don't Encourage.... economic growth? Increase taxes on savings

Discourage

Encourage/Don't Encourage.... economic growth? Outlaw teaching physics in high schools

Discourage

Mason, a machinist in a coal mine, has a freak accident loading coal, which left him severely disabled. He has since been released from his employment with a severance package for life, but he would like to continue to work. Months pass and he gets no offers despite his stellar resume. Mason gave up on the job hunt four weeks ago.

Discouraged Worker

Employment Status? Anna Conda is currently on a hiking vacation in the Amazon jungle from her part-time job as a herpetologist at the San Diego Zoo.

Employed

Lily is a recent economics college graduate and has started her first job as a business analyst.

Employed

Encourage/Don't Encourage.... economic growth? Promote Regulations that favor investment

Encourage

Encourage/Don't Encourage.... economic growth? Protect the ability of inventors to profit from their inventions

Encourage

Encourage/Don't Encourage.... economic growth? Provide grants to colleges for research and design

Encourage

Encourage/Don't Encourage.... economic growth? Reduce taxes on business investment

Encourage

Encourage/Don't Encourage.... economic growth? Support Infrastructure Projects

Encourage

Encourage/Don't Encourage.... economic growth? Support technical training

Encourage

Encourage/Don't Encourage.... economic growth? oversee the safety of banks and financial systems

Encourage

Which is FALSE according to efficiency-wage jobs? - Efficiency wages result in an increase in the rate of unemployment. - The wage rate will eventually return to the market-clearing level. - Elevated wages serve as an economic incentive to work harder. - Efficiency wage jobs result in a surplus of workers at the wage being offered.

FALSE: the wage rate will eventually return to the market-clearing level.

GDP Grows... Faster/Slower? Efficient financial markets

Faster

GDP Grows... Faster/Slower? Property rights clearly defined & upheld

Faster

Included/Not Included as input into the aggregate production function for GDP? - significant amount of oil discovered in Texas

Included

Included/Not Included as input into the aggregate production function for GDP? - unskilled migrant workers from Latin American

Included:

Increase OR Decrease the natural rate of unemployment? A large number of young people entering the labor force

Increase

Increase OR Decrease the natural rate of unemployment? Extra financial benefits for the unemployed

Increase

Increase OR Decrease the natural rate of unemployment? Increasing minimum wage

Increase

Included/Not Included as input into the aggregate production function for GDP? - Profits of a large investment company

Not Included

"After several months of searching for a job, LD has stopped looking. He instead spends time with family."

Not in Labor Force

Suppose the economy is initially in long-run equilibrium and producing at the full employment level of output. Then, a giant storm temporarily shuts down all shipping routes in the Atlantic Ocean. In the short run, the __________ will shift ________ .

SRAS curve will shift LEFT

GDP Grows... Faster/Slower? Children go to work instead of school

Slower

GDP Grows... Faster/Slower? Deeply rooted tradition

Slower

GDP Grows... Faster/Slower? Inadequate public health

Slower

Olivia has a PhD in economics but due to the severe recession has a hard time finding a job. She takes a part time job as a consultant, but would prefer a full time gig so that she can have insurance benefits.

Underemployed

Employment Status? Bonnie Ann Clyde has not had any work at all for six months despite the fact that she has been filling out at least eight job applications each day.

Unemployed

Fred, a computer programmer, recently quit his job at Vurve due to the onset of carpal tunnel syndrome and is now trying to find a new job that won't hurt his wrists as much. He is confident as many startups are hiring.

Unemployed

Government rules and regulations often _____________ businesses from hiring new workers due to the additional cost of managing and navigating the bureaucratic regulatory environment, as well as the difficulty of hiring or firing workers quickly due to government oversight and involvement in the process.

discourage

When the official unemployment rate is calculated, underemployed workers are counted as...

employed

If a government provides substantial benefits to the unemployed while they look for work, it reduces the _____________________________ of being unemployed.

opportunity cost

When considering economic growth, what do policy makers focus on due to the the potentially distorting effects of inflation and population change?

real GDP per capita

If a government provides substantial benefits to the unemployed while they look for work, it _______ the opportunity cost of being unemployed.

reduces

For unemployed workers, the length of unemployment will be determined by many factors, including the ________________________ or period of time the benefits are provided, and the ___________ of their benefits, including the amount of insurance, food stamps, and medical benefits.

- duration - size

Any large, sustainable increase in real GDP must be the result of increased_____________. That is, it must be due to higher __________.

- output per worker - labor productivity

How can gov't facilitate economic growth?

1. Government can enact policies which either increase the # of inputs (human capital, physical capital, or labor) or 2. increase the ability of those inputs to produce output (increases in technology).

In the market for labor, individuals who are willing to work are represented by the __________ curve while employers, looking for workers to hire, are represented on the ____________ curve.

> individuals willing to work = SUPPLY curve > employers looking for workers to hire = DEMAND curve