Exam 1 Macro
3 Stages of CPI
1- Selecting CPI Basket 2- Conducting Monthly Price Survey 3- Calculating CPI
In the business cycle, what immediately precedes the time when real GDP is falling?
Peak
What is NOT a source of bias in the CPI
Quantity Change Bias
If the federal government expands its support of education and restraining of workers who have been unemploymed for a relatively long length of time, what unemployment would be targeted?
Structural
If a private wage contract is agreed upon with a cost of living adjustment such that wage hikes are equal to increases in the CPI,
Workers benefit because the CPI increases more rapidly than does the cost of living
Gross Domestic Product equals
Y = C + I + G + NX
The concept of human capital describes
human skills, that is, the quality of labor
Potential GDP is
the amount of real GDP that the economy would produce if it were at full employment of all resources
The business cycle describes
the behavior of real GDP over time
Formula for inflation
(Current CPI-Previous CPI)/Previous CPI x 100
Formula for CPI
CPI Basket current prices/CPI basket at base prices. All times 100
in constructing the CPI, the BLS has to deal with commodity substitution bias, which is defined as
Consumer subsitution of cheaper goods for goods whose prices have increased
During the great depression of the 1930s when the unemployment rate was exceptionally high, the government instituted programs such as the civilian conservation core, to reduce what type of unemployment?
Cyclical
Which item has the largest weight in the CPI basket?
Housing
The Natural Unemployment Rate
includes only frictional and structural unemployment.