ECON HW #6 Unemployment
Frictional unemployment
unemployment that occurs when people take time to find a job
Cyclical unemployment includes people who become unemployed from
changes in the business cycle.
The CPI stands for
consumer price index
Cyclical unemployment is
created by a recession.
Janae was fired from her job with Microsoft in the 2008minus−09 recession because Microsoft's sales dipped. Janae's unemployment would be best classified as
cyclical unemployment.
Three types of unemployment
frictional, structural, cyclical
Rosina Gonzales quit her job in Pennsylvania and moved to California to be close to her family. She is currently looking for work, so she would be considered
frictionally unemployed.
The items included in the CPI are
goods and services consumed by the typical urban household.
Rob is considered unemployed in the Current Population Survey if he
has looked for a job in the last four weeks but has not found a job.
The unemployment rate that includes discouraged workers and people working part-time who would prefer full-time jobs is
higher than the official unemployment rate, and the difference between the two grows larger in recessions.
The natural unemployment rate
includes only frictional and structural unemployment.
During a recession, the average duration of unemployment tends to
increase.
The natural rate of unemployment is
the sum of structural unemployment and frictional unemployment
In 2011, real GDP in the United States was below potential GDP. This fact definitely means that
the unemployment rate was above the natural unemployment rate.
If a significant number of part−time workers successfully find full−time employment, then
the unemployment rate will remain unchanged
Labor force participation rate
(labor force / working-age population) * 100
Which is true regarding cyclical unemployment?
Cyclical unemployment is zero at full employment.
If the U.S. economy was close to full employment in May of 2017, why was the U-6 measure of unemployment rate still as high as 8.6?
Even at full employment, there were many discouraged workers and part-time workers who wanted full-time jobs.
How does the U.S. economy create and destroy millions of jobs each year?
In the market system, new firms are constantly entering and exiting various industries, and some businesses are expanding while others are contracting
Why do economists and policymakers track changes in the U-6 measure?
The official U-3 measure may understate the true extent of joblessness in the economy
Describe the relationship between frictional unemployment and job search
People are said to be frictionally unemployed when they are between jobs or and searching for new jobs
Labor force participation rate
Percentage of the working-age population in the labor force
The type of unemployment most likely to result in hardship for the people employed:
Structural unemployment because this requires retraining to acquire new job skills
What does "full employment" mean?
There is no cyclical unemployment; the only remaining unemployment is structural and frictional
U6 unemployment rate
a broader measure of the unemployment rate that includes discouraged workers and part-time workers who want full time jobs
Structural unemployment usually lasts ________ period of time ________ unemployment
a longer ; than frictional
The CPI is biased because it
does not always take into account the changes in product quality.
In the Current Population Survey, a person is considered unemployed if the person
does not have a job and is actively looking for a job.
If KeKe, age 32 worked 12 hours as a paid employee the week before the Current Population Survey, KeKe is classified in the Current Population Survey as ________ when calculating the unemployment rate.
employed
Suppose a 23−year old graduate student is looking for a full−time job, but has to take a part−time job instead. He or she will be categorized in the Current Population Survey as ________ when calculating the unemployment rate.
employed
The working−age population includes
employed and unemployed people over the age of 16.
Since nominal incomes increase with inflation,
expected inflation does not affect the purchasing power of the average consumer.
The CPI overstates inflation because the average consumer buys
less of those goods whose relative price has risen.
When the economy is at full employment, the
natural unemployment rate equals the unemployment rate.
The difference between nominal and real is
nominal is measured in current dollars and real is measured in dollars of a given year.
Frictional unemployment is the result of
normal labor market turnover.
Phillip is a 22−year old who has no job and is available for work, but has not actively looked for a job in the last month. The Current Population Survey identifies Phillip as ________ , ________ the labor force, and ________ the working−age population.
not unemployed; not part of; part of
Unemployment rate formula
number of unemployed/labor force x 100
U3 unemployment rate
official unemployment rate
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 unemployment rate is the
percentage of the labor force that does not have a job.
The GDP deflator is a measure of
price level
The GDP deflator is a measure of
prices
After 15 years with Ford Motor Corporation, one summer Cameron loses his job. His boss explained that his position has been downsized after the technological advances in automobile production. Cameron is best considered
structurally unemployed.
Structural unemployment includes people who become unemployed from
technological changes.
At full employment there still exists some unemployment because
the U.S. economy is constantly creating and destroying jobs.
Full employment occurs when
the cyclical unemployment rate is zero.
When the economy is at full employment, unemployment is equal to:
the natural rate of unemployment
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.
During an recession, the duration of unemployment ________ and the unemployment rate is ________ the natural rate of unemployment.
lengthens; greater than
Suppose the CPI in 1983 is 100 and the CPI this year is 172. These values for the CPI mean that
typically, a good whose price was $100 in 1983 had a price of $172 this year.
The labor force includes people who
are actively seeking a job but do not have a job.
The CPI is a measure of the
average prices paid by consumers for a fixed basket of goods and services.
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.
structural unemployment
unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one
cyclical unemployment
unemployment that rises during economic downturns and falls when the economy improves