intro macroeconomics: ch 9 assignment
which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment rate?
(number of unemployed / number in labor force) * 100
TABLE 2008 (year) --> $16 (nominal average hourly earnings) --> 202 (CPI) 2009 (year) --> $17 (nominal average hourly earnings) --> 207 (CPI) 2010 (year) --> $18 (nominal average hourly earnings) --> 209 (CPI) 1) what is the real average hourly wage in 2009? 2) what can be said about real average hourly earnings and nominal average hourly earnings between 2008 and 2010?
1) $8.21 $17 / 207 (CPI) = 0.08212 0.08212 * 100 = 8.212 2) both real and nominal average hourly earnings increased 2008 answer $7.92 $16 / 202 (CPI) = 0.07920 0.07920 * 100 = 7.920 2010 answer $8.16 $18 / 209 (CPI) = 0.08612 0.08612 * 100 = 8.162
the BLS uses the establishment survey to collect information on employment in the economy. Indicate one drawback of the establishment survey compared to the current population survey and indicate one advantage
1) it is based on company payroll and not on unverifiable answers 2) it does not include information about self-employed people
how does the U.S. economy create and destroy millions of jobs each year?
1) some businesses are expanding, while others are contracting 2) in the market system, new firms are constantly entering and exciting various industries
BASE YEAR denim jeans: 1 (quantity), $60 (price), $60 (expenditures) pizzas: 20 (quantity), $12 (price), $240 (expenditures) coffee drinks: 20 (quantity), $5 (price), $100 (expenditures) total (expenditures): $400 2014 YEAR denim jeans: $120 (price), $120 (expenditures) pizzas: $18 (price, $360 (expenditures) coffee drinks: $5 (price), $100 (expenditures) total (expenditures): $580 2016 YEAR denim jeans: $95 (price), $95 (expenditures) pizzas: $16 (price), $320 (expenditures) coffee drinks: $6 (price), $120 (expenditures) total (expenditures): $535 round to two decimal places the CPI in 2014 equals _____ the CPI in 2016 equals _____
2014 Answer 145 580 / 400 = 1.45 1.45 * 100 = 145 2016 Answer 133.75 535 / 400 = 1.3375 1.3375 * 100 = 133.75
if a 3-month Treasury bill pays 5.5% and the change in the consumer price index (CPI) is 4.7%, what is the real interest rate (the true return to lending)?
Answer 0.8% 5.5% - 4.7% = 0.8
your father earned $34,000 per year in 1984. To the nearest dollar, what is that equivalent to in 2014 if the CPI in 2014 is 215 and the CPI in 1984 is 104?
Answer 70,288 215 / 104 = 2.06730769 2.06730769 * 34,000 = 70,288.4615
natural rate of unemployment
The normal rate of unemployment, consisting of frictional unemployment plus structural unemployment
structral unemployment
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of available jobs.
efficiency wage
a higher-than-market wage that a firm pays to increase worker productivity
the difference between nominal and real values is important when money is being borrowed and lent the stated interest rate on a loan is the _____ interest rate. The _____ interest rate corrects the stated interest rate for the effects of inflation on purchasing power the relationship between nominal and real interest rates is _____
a) nominal b) real c) real interest rate = nominal interest rate - inflation rate
when the economy is at full employment,
all of the above a) all remaining unemployment is either frictional or structural b) the unemployment rate is greater than zero c) the natural rate of unemployment prevails
which of the following causes changes in the CPI to overstate the true inflation rate?
all of the above a) increase in quality bias b) substitution bias c) new product bias
even perfectly anticipated inflation imposes costs. why?
all of the above a) paper money loses its purchasing power by the rate of inflation b) menu costs c) some wages will fail to keep up with anticipated inflation
why is the unemployment rate, as measured by the Bureau of Labor Statistics, an imperfect measure of the extent of joblessness in the economy?
all of the above a) underemployed people are considered employed b) it does not account for inaccurate responses to the Current Population Survey c) it fails to account for illegal activities d) discouraged workers are not considered unemployed
producer price index (PPI)
an average of the prices received by producers of goods and services at all stages of the production process
suppose the fixed interest rate on a loan is 5.75% and the rate of inflation is expected to be 4.25%. the real interest rate is 1.5%. suppose now that instead of 4.25%, the inflation rate unexpectedly reaches 5.5%. who gains and who loses from this unanticipated inflation?
borrowers gain from a lower real interest rate lenders lose from a lower real interest rate
according to Costco's CEO, Jim Sinegal: "Paying good wages and keeping your people working for you is good business...Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you." sources: Alan B. Goldberg and Bill Ritter, "Costco CEO Finds Pro-Worker Means Profitability," ABCnews.com, Aug. 2, 2006; Lori Montgomery, "Maverick CEO Joins Push to Increase Minimum Wage," Washington Post, Jan. 30, 2007. what is Costco's CEO referring to?
efficiency wages
which of the following can give an early warning of future increases in the price level?
producer price index
when compared to the Great Depression, the typical length of unemployment in the modern (post-Great Depression-era) U.S. economy is
relatively brief
frictional umemployment
short-term unemployment that arises from the process of matching workers with jobs
what effect do labor unions have on the unemployment rate?
since few non-government workers are unionized, there is no significant effect on the unemployment rate
suppose that Sally J. Society recently lost her job as an underwater welder. in looking for a new job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. if Sally J. Society decides to return to school to earn an Economics degree, what is the best classification of her unemployment status?
structurally unemployed
how do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment rate?
they decrease the opportunity cost of job search
indicate whether the following statement is true or false and why "A wage rising slower than the rate of inflation is actually falling."
true if wages are increasing slower than the average price of goods and services, purchasing power fails
in April 2019, the working-age population of the United States was 258.7 million. The working-age population is divided into those in the labor force (162.5 million) and those not in the labor force (96.2 million). The labor force is divided into the employed (156.6 million) and the unemployed (5.8 million). Those not in the labor force are divided into those not available for work (91.3 million) and those available for work (4.9 million). Finally, those available for work but not in the labor force are divided into discouraged workers (0.5 million) and those currently not working for other reasons (4.4 million) use this data to help determine which one of the following statements is true:
both A and B above are true a) the unemployment rate is ( 5.8 million / 162.5 million ) * 100 = 3.6% b) the labor force participation rate is ( 162.5 million / 258.7 million ) * 100 = 62.8%
suppose John Q. Worker is currently unemployed. each day, John Q. worker spends the entire day searching available job openings for an appropriate position given his set of skills, abilities, and interests. if someone asks John Q. what he does for work, he tells them that he is currently "in-between jobs." which of the following best classifies John Q.'s unemployment status?
frictionally unemployed
