Macro 2nd Test

How to calculate inflation rate

(CPI this year - CPI last year) / CPI last year) x 100

How to calculate CPI

(Cost of fixed basket in year X/ Base year cost of fixed basket) x 100

Labor Force Participation

(Number in Labor Force/ Working - Age pop.) x 100

Unemployment Rate

(Number of Unemployed/ Labor Force) x 100

how to calculate fixed year basket

(base year quantity x price)

CPI

Computed and reported every month by the Bureau of Labor Statistics

The price index which is used to measure changes in the cost of living is the a) Consumer Price Index b) GDP Deflator c) Retail Price Index d) Producer Price Index

Consumer Price Index

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 a. Cyclically unemployed b. Frictionally unemployed c. Seasonally unemployed d. Structurally unemployed

Cyclically unemployed

Unemployed people

Did not work for at least one hour in the past week for pay Actively searched for work in the last 4 weeks

Which of the following is true about the calculation of the consumer price index a) It assumes that consumers purchase the same amount of each product in the market basket each period. b) Every month, it updates the price changes of new products added to the market basket, as these tend to fall. c) It filters out the part of price increases that occurs because of quality improvements in products. d) It accounts for people switching to goods whose prices have fallen.

It assumes that consumers purchase the same amount of each product in the market basket each period

cyclical unemployment

Job loss that results directly from changes in economic production (recessions)

Who of the following would be included in the Bureau of Labor Statistics' "unemployed" category a. Juan Carlos, a full-time student who is not looking for work b. Kevin, who is on layoff c. Andrea, who has retired and is not looking for work d. All of the above are correct.

Kevin, who is on layoff

Producer Price Index (PPI)

Measure of the cost of a basket of goods and services bought by firms

(Consumer Price Index)

Measure of the overall cost of goods and services bought by a typical consumer

Consumer Price Index

Measure of the overall level of prices. Measure of the overall cost of goods and services bought by a typical consumer

GDP deflator

Nominal GDP/Real GDP x 100

Employed people are who worked for pay in the past week

Paid employees in their own business Unpaid workers in a family member's business Full-time and part-time workers Temporarily absent because of vacation, illness, bad

seasonal unemployment

Predictable changes in the unemployment rate that happen every year

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? a. Cyclically unemployed b. Frictionally unemployed c. Seasonally unemployed d. Structurally unemployed

Structurally unemployed

Which of the following would be included in the GDP deflator, but not the Consumer Price? a) The price of a new computer for the lecture hall at Cal Poly b) The price of a used automobile c) The price of a new U.S.-manufactured stereo system d) The price of a new dinner in a U.S. restaurant

The price of a new computer for the lecture hall at Cal Poly

frictional unemployment

Time lag between leaving one job and starting a new on

Inflation rate

an increase in the overall level of prices in the economy

structural unemployment

mismatch between skills of workers and needs of employers

Changes in PPI

often thought to be useful in predicting changes in CPI

Problems with CPI

substitution bias, introduction of new goods, unmeasured quality change