AGEC 1010 Chapter 8

What most accurately describes how to calculate the unemployment rate

(Unemployed / labor force) × 100

Unit of account costs

(of inflation) costs arising from the way inflation makes money a less reliable unit of measurement.

Shoe leather costs

(of inflation) the increased costs of transactions caused by inflation.

According to this table February 2009 212.2 February 2010 216.7 February 2011 221.6 February 2012 224.6 the inflation rate between 2011 and 2012 is

1.4%

Most economists agree that a binding minimum wage

contributes to structural unemployment

The deviation of the actual rate of unemployment from its natural rate is known as

cyclical unemployment.

Individuals who give up looking for work because they don't feel that there are good prospects of finding a job are known as

discouraged workers

A drop in the inflation rate is called

disinflation

The natural rate of unemployment is

equal to the sum of frictional and structural unemployment

U.S. data from the past 60 years shows that

falling real GDP is always associated with a rising rate of unemployment

In general, expansions are characterized by

falling unemployment

For most of U.S. modern economic history, when the unemployment rate is _____, real GDP is _____

falling; rising

An example of structural unemployment is a(n): real estate agent who leaves a job in Texas and searches for a similar, higher-paying job in California. worker at a fast-food restaurant who quits work and attends college. autoworker who is temporarily laid off from an automobile company because of a decline in sales. geologist who is permanently laid off from an oil company because of an increase in wages won by labor unions.

geologist who is permanently laid off from an oil company because of an increase in wages won by labor unions.

Minimum wage laws are imposed with the goal of

helping workers earn enough to afford a basic lifestyle.

Real income

income divided by the price level.

Discouraged workers

individuals who want to work but who have stated to government researchers that they aren't currently searching for a job because they see little prospect of finding one given the state of the job market.

The inflation rate

is the annual rate of increase in the price level

Cyclical unemployment

is the share of unemployment arising from the business cycle

Unit-of-account costs refer to the

loss of the reliability of money as a relative unit of measurement

Unexpected deflation

makes it harder for borrowers to repay their loans

The threat of future inflation

makes people more reluctant to lend money for long periods

Costs associated with changing a listed price are known as

menu costs

Labor unions contribute to structural unemployment by

negotiating for wages above the equilibrium level

Marginally attached workers

nonworking individuals who say they would like a job and have looked for work in the recent past but are not currently looking for work.

The rate of unemployment is found by dividing the

number of people looking for work by the number of people looking for work plus the number of people employed

The wage divided by the price level is known as the

real wage

Efficiency wages are

set above equilibrium wages to act as an incentive for better performance

Labor force participation rate

the percentage of the population age 16 or older that is in the labor force.

Unemployment rate

the percentage of the total number of people in the labor force who are unemployed, calculated as unemployment/(unemployment + employment)

The unemployment rate is

the portion of the labor force unemployed

Interest rate

the price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year.

Disinflation is

the process of bringing about a decline in the inflation rate

Disinflation

the process of bringing down inflation that has become embedded in expectations

Menu costs

the real cost of changing a listed price

Actual unemployment is equal to

the sum of cyclical unemployment and natural unemployment

Labor force

the sum of employment and unemployment; that is, the number of people who are currently working plus the number of people who are currently looking for work.

Natural unemployment is equal to

the sum of frictional unemployment and structural unemployment

Employment

the total number of people currently employed for pay in the economy, either full-time or part-time.

Unemployment

the total number of people who are actively looking for work but aren't currently employed.

Real wage

the wage rate divided by the price level

Structural unemployment occurs when

the wage rate is persistently above its equilibrium level

The natural rate of unemployment rises when

there are more new entrants to the labor force

Frictional unemployment

unemployment due to time workers spend in job search.

Structural unemployment

unemployment that results when there are more people seeking jobs in a labor market than there are jobs available at the current wage rate.

Efficiency wages

wages that employers set above the equilibrium wage rate as an incentive for workers to deliver better performance.

Data on the U.S. economy indicate that

when the unemployment rate is low, most unemployment is frictional

Job search

when workers spend time looking for employment.

Employment is the total number of people

who are working either full or part time

In 2011, 10 million people did not have a job but were actively looking for employment and 85 million people had either a full-time or a part-time job. Based on this information, the unemployment rate in 2011 was

10.5%

If the actual unemployment rate is 7% and the natural rate of unemployment is 5% then the cyclical unemployment is

2%

Suppose that the nominal rate of interest is 7% and the inflation rate is 3%. The real rate of interest is equal to

4%

In 2010, _______ percent of unemployed workers were considered long-term unemployed.

43

If there are 100 million people in the total population, a labor force of 50 million, and 47 million employed workers, the unemployment rate is

6%

According to the table Full time employed 20 million Not working but looking for work 2 million Part time employed 10 million Discouraged workers 1 million the unemployment rate is

6.25%

The unemployment rate is based on numbers collected from a monthly survey of _______ families

60,000

Which of the following individuals would be counted as unemployed? A marginally attached worker A discouraged worker A worker who is underemployed An individual who is currently not working, but is looking for work in a high-paying industry

An individual who is currently not working, but is looking for work in a high-paying industry

The official unemployment rate ignores

Discouraged workers who have given up looking for a job

Last month Brent lost his job at the auto parts factory because his factory, like many factories, relocated to Asia. Brent has bee looking for similar factory jobs in his town but has found no openings. Brent is best classified as

Structurally unemployed

Which federal agency calculates the official unemployment rate

The Bureau of Labor Statistics

Last month Brent lost his job at the auto parts factory because his factory, like many others, relocated to Asia. Brent and his former co-workers have been looking for similar factory jobs in the town, but they have found no openings. Which of the following best describes what has happened to the labor market in Brent's town?

The demand for labor has fallen

Which of the following is TRUE concerning interest rates? The real interest rate can only be positive. The real interest rate cannot be negative. The real interest rate can be zero, positive, or negative. The nominal interest rate can be negative.

The real interest rate can be zero, positive, or negative.

Which labor market measure includes the underemployed, discouraged workers, and marginally attached workers along with as a measure of labor under utilization

U6

Which of the following statements is FALSE? In general, there is a trade-off between inflation and unemployment in the short run. There is a strong negative relation between growth in real GDP and changes in unemployment. Unemployment always rises during recessions. Unemployment always falls during expansions.

Unemployment always falls during expansions

Unemployment rates are usually higher in Europe than in the United States because

Unemployment benefits are more generous in Europe than in the United States

Which of the following is true? Unexpected inflation benefits borrowers and hurts lenders. Unexpected inflation benefits borrowers but does not affect lenders. Unexpected inflation benefits lenders and hurts borrowers. Unexpected deflation benefits lenders but does not affect borrowers.

Unexpected inflation benefits borrowers and hurts lenders

Internet employment agencies have simplified the job search for the applicants. They have also led to

a decrease in frictional unemployment

Jobless recovery

a period in which GDP growth rate is positive but the unemployment rate is still rising.

An efficiency wage is

a wage set above the equilibrium level in order to motivate employee performance

To be considered unemployed a person must

be currently not working but actively seeking employment

If the actual inflation rate is higher than expected,

borrowers gain at the expense of lenders

Deflation is a

decrease in the average level of prices

When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum, economists say that Emily is experiencing a

shoe-leather cost

Increased costs of transactions caused by inflation are known as

shoe-leather costs.

Unemployment that results when there are more people seeking jobs in a labor market than there are jobs available is called

structural unemployment

A persistent surplus of job-seekers in a particular market gives rise to what is known as

structural unemployment.

Cyclical unemployment is equal to

the difference between actual unemployment and natural unemployment

Cyclical unemployment

the difference between the actual rate of unemployment and the natural rate of unemployment.

When there is deflation in the economy

the general price level falls

Nominal interest rate

the interest rate in dollar terms.

The sum of employment and unemployment is known as

the labor force.

If there are discouraged workers,

the measured unemployment rate may understate the percentage of people who would like to work but are unable to find jobs

Real interest rate

the nominal interest rate minus the inflation rate.

natural rate of unemployment

the normal unemployment rate around which the actual unemployment rate fluctuates; the unemployment rate that arises from the effects of frictional and structural unemployment.

Underemployment

the number of people who work part-time because they cannot find full-time jobs.