((Chapter 7)) Unemployment and Inflation, Macro Homework, Econ Ch.9

Réussis tes devoirs et examens dès maintenant avec Quizwiz!

most common measure of inflation

% change of the consumer price index

find real variable or (earnings)

(100/year trying to find) x earned salary for that year

costs of anticipated inflation

-changes in distribution of income -"menu costs" of inflation (changing prices) -lenders and borrowers expect high inflation in the future then nominal interest rates will rise -raise taxes -inefficient allocation of resources -increases average level of prices

problems causing measured unemployment to understate actual joblessness

-discouraged workers: not counted in LF -part-time workers: underemployed

jobs destroyed

-firms go out of business -contraction of existing firms

economy in good shape

-jobs eliminated number is high -jobs created number is also high

economy is at full employment

-natural rate of unemployment prevails -unemployment rate is great than zero -all remaining unemployment is either frictional or structural

job created

-new firms -expansions of existing

problems causing measured unemployment to overstate actual joblessness

-people who falsely claim to be "actively looking" for work -people employed in illegal industries often report themselves as unemployed

problems measuring cost of living changes (CPI)

-substitution bias -increases in quality bias -new product bias -outlet bias

The normal underlying level of unemployment in the economy is

All of the above

Frictionally unemployed =

Between jobs and searching for new jobs

The price index which is used to measure changes in the cost of living is the

Consumer Price Index (CPI)

Ten years from now

Frank will have a higher real incomes although he has a lower nominal income.....

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

It fails to account for illegal activities, it does not account for inaccurate responses to the Current Population Survey. Discouraged workers are not considered unemployed. Underemployed people are considered employed.

Between December 2001 and January 2002, the total number of people employed and the unemployment rate both fell. How is this possible?

It is possible if labor force participation rates also fall.

Percentage of working-age population

Labor Force/Working-age population X 100

Labor Force Participation Rate

Labor force / Working-Age Population x 100 The percentage of the working-age population in the labor force.

Which one of the following choices shows how data nominal wages for 2007 to 2013 and data on the consumer price index for the same years can be used to calculate the real wage for these years?

Nominal Wages / Price Index x 100 = Real Wages

Unemployment Rate Formula

Number of Unemployed / Labor Force x 100

Unemployment Rate =

Number of Unemployed/Labor Force X 100

Real income is defined as the following

Real Income=Nominal Income/CPI(current year X 100

How does the US economy create and destroy millions of jobs each year

Some businesses are expanding, while others are contracting. In the market system, new firms are constantly entering and exiting various industries.

Natural rate of unemployment is

Structural unemployment+Frictional unemployment

Experts in hand-drawn animation who remain unemployed due to the film industry's switch to computer-generated animations are considered to be..

Structurally unemployed

If inflation is unexpectedly high, borrowers will benefit and lenders will be harmed

TRUE

Which of the following steps has not been taken by the BLS to reduce the size of the bias in the CPT

The BLS has expanded the number of stores from which it collects the price information to reduce the coverage bias

Relative to the household survey, which of the following is a strength of the establishment survey?

The establishment survey is determined by actual payrolls, rather than by the unverified answers of the household survey

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

The household survey interviews households and measures the unemployment rate whereas the establishment survey interviews businesses and measures the employment rate

Computation of the CPI does not include

The quantities of the products households purchase in the current year

Which of the following is not one of the conditions someone needs to meet to be counted as unemployed

They had worked only one hour per week during the previous four weeks

Which of the following is NOT one of the conditions someone needs to meet to be counted as unemployed?

They had worked only one hour per week during the previous four weeks.

real interest rate provides

a better measure of the true cost of borrowing and the true return from lending than does the nominal interest rate

Suppose that the inflation rate turns out to be much lower than most people expected..

a borrower will lose from the situation while a lender will gain

deflation

a decline in the price level -negative inflation rate

consumer price index

a measure of the average change over time in the prices a typical urban family of four pays for the goods and services they purchase

unemployment will not be zero

bc of frictional and structural unemployment

inflation is higher than expected

borrower benefits and lender is harmed

inflation is lower than expected

borrower is harmed and lender benefits

outlet bias

consumers often shop at stores with cheaper prices than the stores visited in data collection

menu costs

costs to firms of changing prices

Which of the following is not considered one of the potential biases in calculation the consumer price index

coverage bias

Workers who lose their jobs because of a recession are experiencing

cyclical unemployment

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

does not affect the employment-population ratio

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

does not affect the employment-population ratio.

find salary with equivalent purchasing power as x year

earned salary (new year/ old year)

employment-population ratio

employment/ working-age population X 100 -measures the percentage of the working-age population that is employed

unemployment rate falls during

expansions

Since nominal incomes increase with inflation,

expected inflation does not affect the purchasing power of the average consumer

All of the following are problems caused by deflation except

firms make higher profits as consumers buy more goods and services

When the economy is at full employment, which types of unemployment remain?

frictional and structural

The short-term unemployment that arises from the process of matching workers with jobs is called

frictional unemployment

The three types of unemployment are

frictional, structural, and cyclical unemployment

The employment-population ratio provides the "best summary" of the state of the job market rather than the unemployment rate because it measures the fraction of the population that

has jobs

minimum wage laws

has only a small effect on the unemployment rate since only a small part of the labor force earns the minimum wage

-increase in cyclical unemployment -increase in frictional unemployment

increase in the unemployment rate

An efficiency wage

increases the unemployment rate since firms pay a higher-than-market wage that increases the quantity of labor supplied

efficiency wage

increases the unemployment rate since firms pay a higher-than-market wage that increases the quantity of labor supplied

establishment survey

interviews businesses and measures the employment rate -economists prefer this survey because it is determine by actual payroll records rather than unverified ansers

household survey

interviews households and measures the unemployment rate

all depends on the inflation rate

it is immpossible to know whether a particular nominal interest rate is "high" or "low" because

price level

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

real interest rate can be

negative

new product bias

new products are not included immediately , prices of new products quickly drop

DO you agree with the reporters definition of deflation

no, deflation is defined as a negative inflation rate

real interest rate

nominal interest rate adjusted for inflation, nominal interest rate minus the inflation rate

economy is experiencing deflation

nominal interest rate will be lower than the real interest rate

The difference between a nominal variable and a real variable is that

nominal is calculated in the current year prices and real is measured in dollars in the base year

find how many workers are in the labor force

number of unemployed workers/ unemployment rate

find workers (employed) in labor force

number of unemployed workers/ unemployment rate

increase in quality bias

over time quality of most goods increases

Cyclically unemployed

part-time/seasonal

All of the following are problems in measuring the unemployment rate except that

people on active military service are included as unemployed

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

not in the labor force

people who dont have jobs and are not actively looking for a job or have looked at some point during the previous 12 months but have not looked during the previous 4 weeks

Inflation can affect the distribution of income because

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 affects distribution income

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 decreasing purchasing power

The employment-population ratio measures the

percentage of the working age population that is employed

The employment-population ratio measures the

percentage of the working age population that is employed.

relationship between the price level and the inflation rate

positive rates of inflation imply the price level is rising

if CPI rises

purchasing power also rises

unemployment rate rises during

recessions

The Internet has _____ the size of menu costs.

reduced

unemployment rate

shows the percentage of the labor force that is considered unemployed

costs of unanticipated inflation

some people win and some loose money -can never determine an accurate inflation rate

nominal interest rate

stated interest rate on a loan

The type of unemployment most likely to result in hardship for the people who are unemployed is

structural because this type of unemployment requires retraining to acquire new jobs skills

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called

structural unemployment

normal underlying level of unemployment

sum of frictional and structural unemployment

GDP deflator

the broadest measure we have of the price level bc it includes the price of every final good -measure of inflation is the % change of the ____

interest rate

the cost of borrowing funds, expressed as a percentage of the amount borrowed

Menu costs are

the costs to firms of changing prices

small, small

the effect of labor unions on overall is ___ since only a ___ percentage of the labor force outside the government is unionized

Many economists prefer

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

The difference between the nominal interest rate and the real interest rate is

the nominal interest rate is stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate.

If the economy is experiencing deflation,

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

If inflation is expected to increase

the nominal interest rate will increase

inflation rate

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

labor force participation rate

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

natural rate of unemployment

the sum of structural unemployment and frictional unemployment, when the economy is at full employment -more stable overtime -"normal rate" of unemployment -"full employment" -level of unemployment we have when cyclical unemployment=0

CPI measures

too much inflation

frictional, structural, cyclical

types of unemployment

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

unanticipated inflation, since it causes greater redistribution of income between thos making payments and those awaiting payments in the future

When there are part-time workers, the official BLS measure of the unemployment rate ___ the true degree of unemployment

understates

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

understates the true degree of joblessness in the economy

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

understates the true degree of joblessness in the economy.

cyclical unemployment

unemployment caused by the business cycle -rises and falls over the business cycle

structural unemployment

unemployment that arises from a persistent mismatch between the skills or attributes of workers and the requirements of jobs -can cause long term unemployment as workers look for ways to gain new job skills

substitution bias

we buy less of a good when its price increases

it is possible if the labor force participation rate also falls

what happens when both total number of people employed decrease and the unemployment rate also decline

The extent of job creation and job destruction is

what we would expect in a vibrant market system

Nominal incomes generally increase with inflation because

when inflation is anticipated, average nominal incomes also increase by the same percentage as the rate of inflation

frictional unemployment

when they are between jobs and searching for new jobs, short-term unemployment that arises from the process of matching workers with jobs -a person who is in between jobs but actively engaged in a job search -more stable overtime -can occur even if the number of available jobs is equal to the number of available workers


Ensembles d'études connexes

Chapter 9 -- Introduction to Organic Molecules

View Set

chapter 13: leadership effectiveness

View Set

Taxes, retirement and other insurance concepts

View Set

Head and Neck Muscles--- Functions

View Set

Chapter 7: How Cells Harvest Energy (Cellular Respiration)

View Set

Unit 2 progress check: MCQ part A

View Set