Macro EXAM #2
calculating growth rate (number of years to double)
70/grwoth rate
If you invest $10,000 in a bond that earns 8% interest per year, how many years will it take to double your money?
8 years and 9 months
if the unemployment rate is 8%, the this means
8% of the labor force is unemployed
deflation
a symptom of bad times, more dangerous than inflation
not in the labor force
if not in employed or unemployed category
Reginald looked for work for six months but could not find a job to his liking. He now spends his time at the beach. For purposes of employment he is considered:
out of the labor force
frictional unemployment
short-term unemployment that arises from the process of matching workers with jobs
unemployed
someone who is not working, available to work, has actively looked for work
One of the reasons that a rise in the price of a fixed basket of goods over time tends to overstate the rise in a consumer's true cost of living is
substitution bias
Since the late 1950s, economists have performed "growth accounting" studies in the United States. These have determined that ________________ is typically the most important contributor to U.S. economic growth.
technology
new good bias
the basket of goods changes only every 10 years
absolute poverty
the condition of lacking basic human needs because of the inability to afford them
nominal interest rate
the interest rate on a loan
natural rate of unemployment
the normal rate of unemployment, bw 5%-5.5%
cyclical unemployment
unemployment caused by recession
the CPI for 2015 was 237, and for 2014 it was 236.7, what is the inflation rate for 2015?
0.13
calculating inflation rate
(CPI of most recent year-CPI of past year)x100
labor force participation rate equation
(labor force/working age population)x100
unemployment rate
(number of unemployed/labor force)x100
other measures of inequality
1. (share of income of top 10%/share of income of bottom 10%) 2. (share of income of top 20%/share of income of bottom 20%)
if the stated rate of interest on your car loan is 6.5%, and the inflation rate is 3%, what is the real rate of interest?
3.5%
average length of unemployment
4 months
If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is
5%
outlet bias
CPI uses full retail price, but many people now buy from discount stores online
most common measure of average standard of living
GDP per capita
GINI Coefficient: perfect equality
GINI=0
GINI Coefficient: complete inequality
GINI=1
GINI coefficient
Shaded area A of graph/total area BCD of graph
inflation
a general increase in prices and fall in the purchasing value of money
consumer price index (CPI)
a measure of the average change over time in the prices a typical urban family of four pays for the goods and services they purchase
price level
a measure of the average prices of goods and services in the economy
efficiency wages
an above market wage that a firm pays to increase worker's productivity
substitution bias
consumers may change their purchasing habits away from goods that have increased in price
The type of unemployment that occurs because of a recession is called:
cyclical unemployment
Since 1948, the labor force participation rate for adult men has ________ and for adult women has ________.
decreased, increased
increase in the quality bias
difficult to separate improvement in quality from increase in proce
If your nominal wage rises more slowly than the price level, we can say your real wage has ________ and the purchasing power of a dollar has ________.
fallen, fallen
seasonal unemployment
frictional, some jobs fluctuate in availability due to seasonal demand
inequality
measures the distribution of income
real interest rate
nominal interest rate - inflation rate
inflation rate
percentage increase in the price level
to achieve a high standard of living, a nation should
promote economic growth
labor force participation rate
the percentage of the working age population in the labor force
long-run economic growth
the process by which rising productivity increases the average standard of living
relative poverty
the state in which a household's income is too low to support minimum requirements
Economists consider full employment to occur when
the unemployment rate consists of only frictional and structural unemployment
structural unemployment
unemployment that results from a persistent mismatch bw skills/attributes of workers and the requirements of jobs
full employment
when all unemployment is due to frictional and structural
employed
worked 1+ hours in reference week(or were temporarily away from their jobs)
