Macro ch 6

In setting A, Harriet loses a job and finds another job doing what she did in the first job. In setting B, Jack loses a job and finds another job doing something very different from what he did in the first job.

It follows that Harriet was frictionally unemployed, while Jack was structurally unemployed.

Real income

Nominal income adjusted for price changes.

Smith's real income has not risen between years 1 and 5, although her nominal income and the price level have both risen. It follows that:

Smith's nominal income increased by the same percentage as the price level increased

The price of a single good—oranges, for example—has risen. It follows that the price level has also risen.

False

If Brian quits his job with a local fast-food restaurant and is looking for a better job, then Brian is a job leaver

If Andrew was previously employed, hasn't worked for some time, and is returning to the labor force, then Andrew is a reentrant

The employment rate is equal to:

The correct answer is The number of employed persons divided by the civilian noninstitutional population. The employment rate is the percentage of the civilian noninstitutional population that is employed. This statistic allows you to see the proportion of the adult population that is currently working. See Section: The Unemployment Rate and the Employment Rate.

Suppose 110 million people are in the civilian labor force and 70 million people are employed. How many people are unemployed? 40 million people

What is the unemployment rate? 36.36%

Bob starts off as part of the noninstitutional population and is in the civilian labor force. Under which scenarios would Bob be considered unemployed?

• Bob has made specific active efforts to find a job during the last 4 weeks and is available to work. • Bob is not working but is waiting to be called back to a job from which he has been temporarily laid off.

Assume that all goods and services that comprise the market basket used to create a price index, are purchased in the same quantities in the current year and in the base year. If the total dollar expenditure on the market basket is greater in the current year than in the base year, which of the following could have occurred?

• Prices of all the goods in the market basket increased. • Prices of some of the goods in the market basket increased, while prices of other goods in the market basket decreased.

An unemployed worker is out of work and searching for work, whereas

a discouraged worker is out of work and not searching for work.

If the number of persons unemployed is 100 and the civilian labor

force is 1,200 persons, then the unemployment rate is 8.34 percent.

The civilian noninstitutional population consists of the total population minus persons under 16, persons

in the armed forces, and persons institutionalized .

If you are more than keeping up with inflation, then your nominal

income has risen by a greater percentage than the inflation rate.

If the number of employed persons is 50 and the employment rate is 10 percent, then it follows that the number of persons in the civilian noninstitutional population is 100 percent.

number of persons in the civilian noninstitutional population is 100 percent.

The market basket is a representative group of goods and

services bought by a typical household.

The natural unemployment rate minus the

structural unemployment rate equals the frictional unemployment rate .

If the economy is operating at its natural unemployment rate,

then it is operating at the full employment rate.

If real income is $54,989 and the CPI is 124,

then nominal income is 68186 dollars.

If nominal income is $50,000 and the CPI is 120,

then real income equals 41667 dollars.

If the unemployment rate is 10 percent and the natural unemployment rate is 6 percent,

then the cyclical unemployment rate is 4 percent.

If the CPI is 213 in year 1 and it is 234 in year 5,

then the increase in the price level during this period of time is 9.859 percent .

If the civilian labor force is 400 persons and the civilian noninstitutional population is

500 persons, the labor force participation rate is 80 percent.

Price Index

A measure of the price level

Price Level

A weighted average of the prices of all goods and services

Types of Unemployment

Actual unemployment rate Frictional unemployment rate Structural unemployment rate Natural unemployment rate Cyclical unemployment rate

When the economy is operating at full employment, the actual unemployment rate is:

Equal to the natural unemployment rate

Suppose 60 million people are employed, 12 million are unemployed, and 50 million are not in the labor force

The civilian noninstitutional population equals 122 Correct million people.

The CPI in the base year equals:

The correct answer is 100. In the base year, the CPI (Consumer Price Index) will always be equal to 100. Using 100 as a benchmark allows one to easily compare changes between the current year and the base year, and to compare different economic measurements that have the base year as their starting point. See Section: Using the CPI to Compute the Price Level.

The labor force participation rate is equal to:

The correct answer is The civilian labor force divided by the civilian noninstitutional population. The labor force participation rate is the percentage of the civilian noninstitutional population that is in the civilian labor force. The labor force participation rate allows you to see the proportion of the adult population that is willing to, and capable of, work. See Section: The Unemployment Rate and the Employment Rate.

Which of the following statements are true?

The correct answers are The actual unemployment rate is equal to the frictional plus structural plus cyclical unemployment rates and The natural unemployment rate minus the structural unemployment rate equals the frictional unemployment rate. There are three kinds of unemployment: structural, frictional, and cyclical. Actual unemployment is the sum of all three. Thus, the actual unemployment rate is the frictional unemployment rate plus the structural unemployment rate plus the cyclical unemployment rate. Structural unemployment (caused by structural economic changes that render some workers unsuited to existing jobs) and frictional unemployment (caused by periodic voluntary movements of workers between jobs) are unavoidable in a dynamic economy, and thus are types of unemployment that are considered consistent with full employment. The natural unemployment rate is, therefore, equal to the sum of the structural and frictional unemployment rates. (And correspondingly, the natural unemployment rate minus the structural unemployment rate equals the frictional unemployment rate.) Only a positive value of the third type of unemployment, cyclical unemployment (unemployment caused by economic downturns), indicates an unemployment rate above the natural unemployment rate and thus less than full employment. See Section: The Natural Unemployment Rate and Full Employment.

Nominal Income

The current dollar amount of a persons income.

If the unemployment rate is 4%, it does not follow that the employment rate is 96% because:

The denominator of the unemployment rate is the civilian labor force and the denominator of the employment rate is the civilian noninstitutional population

Suppose 120 million people are in the civilian labor force and 90 million people are employed. How many people are unemployed? 30 million people

What is the unemployment rate? 0.25%

can the unemployment rate decline if the number of unemployed persons increases?

U=Number of unemployed persons/Civilian labor force

Suppose 100 million people are in the civilian labor force and 80 million people are employed. How many people are unemployed? 20 million people

What is the unemployment rate?

When calculating the CPI, we divide total dollar expenditure on market basket in current year

by total dollar expenditure on market basket in base year and then multiply by 100.

A job loser is a person who was employed in the

civilian labor force and was either fired or laid off.

The base year is a benchmark year that serves as a basis of

comparison for prices in other years.

The civilian noninstitutional population

consists of persons not in the labor force plus the civilian labor force .

CPI

consumer price index