Stupid Macro Quiz CH9

establishment survey/payroll survey

- Samples about 300,000 business establishments - Persons employed on a company payroll - Number of jobs

The household survey

-60,000 households -Employment status of 16 year olds +

1. Substitution Bias 2. Increase in quality bias 3. New product bias 4. Outlet bias

4 Biases that causes changes in the CPI to overstate the true inflation rate

no bc people who are not retired are not counted as unemployed because they are not actively looking for a job.

According to the BLS, the number of people retiring in their 50s has been increasing. As these people counted as unemployed in the BLS data

Expenditures CY/Expenditures BY x100

CPI Formula

increase or decrease, depending on how many people are able to find jobs

If an additional 1 million people enter the labor force, the unemployment rate will likely

increase

If any of the 1 million people entering the labor force find a job, the employemt-population ratio will

CY-LY/LY x100

Inflation Percentage

CPI is the most widely used measure of inflation

Is the CPI accurate?

Real Interest rate + Inflation

Nominal Interest Rate formula

labor unions

Organizations of workers who, together, put pressure on the employers in an industry to improve working conditions and wages.

increase

The labor force participation rate will

Value in $1995 x CPI in 2020/CPI in 1995

Value of $2020=

relatively brief

When compared to the Great​ Depression, the typical length of unemployment in the modern​ (post-Great Depression-era) U.S. economy is

price level

a measure of the average prices of goods and services in the economy

Consumer Price Index (CPI)

a measure of the overall cost of the goods and services bought by a typical urban family of four

firms make higher profits as consumers buy more goods and services

all of the following are problems caused by deflation except

efficiency wage

an above-market wage that a firm pays to increase workers' productivity

Producer Price Index (PPI)

an average of the prices received by producers of goods and services at all stages of the production process

total # of jobs created - # of jobs eliminated

change in # of persons employed

give early warning of future movements in the CPI

changes in the PPI therefore can

no bc deflation is defined as a negative inflation rate

do you agree with the reporters definition of deflation?

establishment, household

economists rely more on the _ survey data rather than the _ survey

employed /working age population x 100

employment to population ratio formula

the economy is not able to generate enough jobs for people seeking work

high unemployment rate means that

rises

if inflation rises, wages _

the nominal interest rate will be lower than the real interest rate

if the economy is experiencing deflation,

lead firms to increase the prices of goods/services purchased by consumers

if the prices of intermediate goods rise this will

employed

if they worked during the week before the survey or if they were temporarily away

people with incomes rising faster than the rate of inflation enjoy an increasing purchasing power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power

inflation can affect the distribution of income because

no, the economy could have created more jobs, but some were also lost during that period

is it likely that the U.S economy created only seven million jobs during this time period?

Labor force/ working age population x 100

labor force participation rate formula

labor force/working age population x 100

labor force participation rate formula

the establishment survey because it is determined by actual payroll records rather than unverified records

many economists prefer

Deflation

negative inflation; most prices in the economy are falling

unemployed

people not working who have looked for work during previous 4 weeks

discouraged workers

people who are available for work but have not looked for a job during the previous four weeks because they believe no jobs are available for them

Nominal interest rate - inflation

real interest rate formula

the nominal interest rate minus the inflation rate

real interest rate formula

frictional unemployment

short-term unemployment that arises from the process of matching workers with jobs (seasonal unemployemt)

labor force

sum of employed and unemployed

purchasing power

the ability to purchase goods and services

menu costs

the costs of changing prices

the percentage of the working-age population in the labor force

the employment-population ratio measures the

-2 percent, which is the nominal interest rate minus the inflation rate

the inflation rate is 6 percent and the nominal interest rate is 4 percent, then the real interest rate is

natural rate of unemployment

the normal rate of unemployment, consisting of frictional unemployment and structural unemployment

inflation rate

the percentage increase in the price level from one year to the next

unemployment rate

the percentage of the labor force that is unemployed

labor force participation rate

the percentage of the working-age population in the labor force

employment-population ratio

the percentage of the working-age population that is employed

the number of discouraged workers and other people not previously counted as unemployed increased

the state's unemployment rate could have decreased at the same time that employment in the state was decreasing because

nominal inerest rate

the stated interest rate on a loan

unanticipated inflation, since people have to pay taxes on the higher nominal income even though the real income has not changed

the type of inflation that is a greater problem to society is

rises, falls

the unemployment rate _ during recessions and _ during expansions

is higher than the official unemployment rate, and the difference between the two groups larger in recessions

the unemployment rate that includes discouraged workers and people working part-time who would prefer full-time jobs

cyclical unemployment

unemployment caused by a business cycle recession

unemployed/labor force x 100

unemployment rate formula

structural unemployment

unemployment that arises from a persistent mismatch between the skills or attributes of workers and the requirements of jobs (long term bc they will need to find a new skill)

borrowers, lenders

unexpected high inflation benefits _ and harms _

does not affect the employment-population ratio

when an unemployed person drops out of the labor force, it

understates the true degree of joblessness in the economy

when an unemployed person drops out of the labor force, the unemployment rate

the household survey interviews households and collects data that is used to measure the unemployment rate whereas the establishment survey interviews businesses and measures total employment in the economy

which of the following depicts an accurate description of the household survey and the establishment survey?

buyers will buy more now if they believe that inflation will follow a period of falling prices

which of the following explains why ending a period of falling prices might result in a higher consumer and firm spending?

black teenagers as a group have lower unemployment rates than white teenagers

which one is not accurate?

All of the above

why is the unemployment rate, as measured by the Bureau of Labor Statistics, an imperfect measure of the extent of joblessness in the economy?

during deflationary periods, the real interest rate exceeds the nominal interest rate, and the real cost of borrowing increases

why would farmers have felt burdened by deflation during this period?