Econ 104 Exam 2

The​ "normal" underlying level of unemployment in the economy is

-the full employment rate of unemployment -the natural rate of unemployment -the sum of structural unemployment and frictional unemployment

Which one of the following is not a measure of the price​ level?

Government Price​ Index: an average of the prices paid by the government for goods and services used only by different government agencies

what is the relationship between frictional unemployment and job search

People are said to be frictionally unemployed when they are between jobs and searching for new jobs.

Bob Wesley believes that structural unemployment should be eliminated in order for an economy to be healthy. In making this​ argument, which of the following relevant issues is he​ ignoring?

Structural unemployment will exist in an economy that is innovative.

Currently, the Bureau of Labor Statistics does not include homemakers in its employment and labor force totals. What would happen to the unemployment rate and the labor force participation rate LOADING... if homemakers were included in these​ numbers?

The unemployment rate would decrease and the labor force participation rate would increase.

How would it affect the unemployment rate if the Bureau of Labor Statistics counted as unemployed both​ (1) discouraged workers and​ (2) people who work​ part-time but would prefer to work​ full-time?

The unemployment rate would increase.

Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there​ aren't any jobs available.

a discouragaed worker

producer price index

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

nominal variable

are calculated in current year prices, is the stated interest rate whereas the real interest rate

real variable

are measured in dollars of the base year for the price index to correct the effects of inflation, the nominal interest rate minus the inflation rate

Unemployment rates are lower for

college graduates than for people without a high school​ degree, and vary greatly among ethnic groups.

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

consumer price index ( CPI)

Which is not considered one of the potential biases in calculating the consumer price​ index?

coverage bias

workers who lose their job because of a recession

cyclical

Suppose that the economy enters into a recession and​ that, as a​ result, Rusty Z. Wrench loses his job as a delivery truck mechanic and remains unemployed. When the economy​ recovers, Rusty's previous employer rehires him. What is the best classification for his time as an unemployed truck​ mechanic?

cyclically

When a company reduces production and employment during economic​ recessions, those employees who lose their jobs are generally considered to be

cyclically

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

does not affect the employment population ratio

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

frictional

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

frictional and structural

A person who is in between jobs but actively engaged in a job search is considered to be

frictionally

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

The minimum wage law

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

does inflation increase of decrease the burden on borrowers

increase bc when they pay back the money it is worth more than when they received it

Government unemployment insurance tends to

increase the unemployment rate by lowering the opportunity cost of job search.

An 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 total employment in the economy.

consumer price index

is an average of the prices of the goods and services purchased by the typical urban family of​ four,

the real interest rate

is equal to the nominal interest rate minus the inflation rate.

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

labor force participation rate

The BLS collects price statistics from traditional​ full-price retail​ stores, which do not reflect the prices some consumers pay by shopping at discount stores or on the Internet.

outlet bias

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.

The​ employment-population ratio measures the

percentage of the working age population that is employed.

The payment of government unemployment insurance reduces the severity of recessions by

preventing a huge drop in income and spending for the unemployed.

deflation

price level decreasing

disinflation

prices increasing at a decreasing rate

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

small, small

he 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 job skills.

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

structural unemployment.

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

structurally

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

Changes in the CPI overstate the true inflation rate due to four​ "biases." If apple prices rise rapidly during the month while orange prices​ fall, consumers will reduce their apple purchases and increase their orange purchases.

substitution bias

Which of the following causes changes in the CPI to overstate the true inflation​ rate?

substitution bias new product bias increase in quality bias

Menu costs are

the cost to firms of changing prices

Why do economists believe that setting a goal of zero percent unemployment is not feasible or​ desirable? Creating a goal of zero percent unemployment for an economy is not feasible nor is it desirable because

the economy needs some​ short-term unemployment in order to allow for better matching of jobs with workers that possess the proper skill sets.

what economist prefer what type of survey? Household or establishment

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

household survey

the household survey interviews households and collects data that is used to measure the unemployment rate

When the economy is at full​ employment, unemployment is equal to

the natural rate of unemployment

When the economy is at full​ employment,

the natural rate of unemployment prevails all remaining unemployment is either frictional or structural the unemployment rate is greater than zero

if the economy is experiencing deflation

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

The unemployment rate in the United States typically has been lower than the unemployment rates in Canada and countries in Western Europe because

the opportunity cost of job search is lower in Canada and countries of Western Europe and unemployed workers in those countries search longer for jobs.

the unemployment rates shows

the percentage of the labor force that is considered unemployed

the natural rate of unemployment is

the sum of structural unemployment and frictional unemployment

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

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

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

understates the true degree of joblessness in the economy.

To have no substitution​ bias, the demand curves for the products in the market basket would need to be

vertical