Chapter 14 learning curve
During a period of deflation:
lenders benefit, because they are repaid dollars with greater real value than they anticipated when signing the loan contract.
The _____ interest rate is the nominal interest rate minus the rate of inflation.
real
Not included in GDP: Nonproduction transactions
stocks, bonds, real estate, OR used goods
Shoe-leather costs
the increased costs of transactions caused by inflation
The broadest measure of unemployment is the:
u6
2 approaches to calculating GDP
Expenditures Approach and Income Approach
3 things that are not included in GDP
Intermediate good, non production transactions, non-market illegal activities
Which factor will cause the natural rate of unemployment to decrease?
an increase in the median age of the labor force
real income
income divided by the price level
f policy is used to reduce unemployment below the natural rate _____ occurs
inflation rates
The sum of employment and unemployment is equal to the:
labor force
Inflation can mean either an increase in the
money supply or price level
structural unemployment
more people are seeking jobs in a particular labor market than there are jobs available at the current wage rate, even when the economy is at the peak of the business cycle.
if Chin loans Pedro $2,000 at 6 percent interest, and there is an unexpected inflation of 7 percent, then:
pedro benefits
menu cost
the real cost of changing a listed price
Income Approach to GDP
the sum of all earnings by households and firms in a year Income= r+w+ir+PR
Expenditures Approach to GDP
the sum of all money spent on buying the GDP C+I+G+(X-M)
natural rate of unemployment
the unemployment rate that arises from the effects of frictional plus structural unemployment.
During a period of deflation, lenders benefit because
they are repaid dollars w greater real value then they anticipated when signing loans
frictional unemployment
unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills
The relationship between the growth of the economy and unemployment is such that as the economy grows, the unemployment rate:
usually falls but could rise
unemployment
workers that are actively looking for a job but aren't working
Extremely low unemployment rates have proved to be more costly than valuable because an economy operating at near full employment will cause two important things to happen:
1. Aggregate demand, 2. Tight labor market
Calculate unemployment rate
= #unemployed/#in labor force times 100
Who is in labor force participation rate? 4
Above 16, able and willing to work, not institutionalized, not in military, or school
Utopia has recently experienced a high rate of inflation and proposes changing its currency from the Utopian dollar to the Utopian mark at an exchange rate of 5.0 Utopian dollars per Utopian mark. Suppose Andrea currently has a debt of $100,000 Utopian. Which statement is true?
Andrea's debt will now equal to 20,000 utopian marks
Unit-of-account costs
costs that arise from the way inflation makes money a less reliable unit of measurement.
Cyclical unemployment tends to _____ during the expansion phase of the business cycle.
decrease
A high level of _____ encourages people to hold more money.
deflation
Anticipated inflation can inflict
real costs in the economy
lenders benefit, because they are repaid dollars with greater real value than they anticipated when signing the loan contract.
set so that there is a persistent surplus in the labor market.
If the government establishes a minimum wage above the equilibrium wage, there may be some _____ unemployment.
structural
When firms pay efficiency wages, _____ unemployment may occur.
structural
_______ unemployment is caused by minimum wage
structural
Cynical Unemployment
the deviation of the actual rate of unemployment from the natural rate due to downturns in the business cycle.
The unemployment rate
the percent of people in the labor force who look for jobs but are no working
