Macroeconomics Chapter 9 Unemployment/Inflation
Which of the following is the correct formula for calculating the unemployment rate?
(number of unemployed)/(labor force) x 100
Complete the following table (Figure 9.7) The CPI in 2014 equals ___ The CPI in 2016 equals ___
145 ; 133.75
If the CPI was 207 in 2009 and 225 in 2013, what wage would someone who earned a $50,000 income in 2009 have to earn in 2013 in order to keep her purchasing power constant?
54,348
Suppose an economy is given by: Population = 265 million Working-age population = 139 million Labor force = 84 million The number of people employed = 79 million The number of people unemployed = 5 million The labor force participation rate for this economy is
60.4%
Price indexes can be used to compare prices across different periods. Suppose that a year of tuition for college at public institutions averaged a cost of $1 comma 969 in 1989 and that the CPI index was 121 in 1989. If the CPI index was 217 in 2009, then the cost of tuition in 2009, as the result of inflation, would equal ______ Suppose that the actual average cost of tuition in 2009 was $6 comma 590. Relative to the expected cost computed above, the cost of tuition increased by ________ the amount of inflation.
6590 ; more than
Suppose the economy's consumer price index (CPI) in 2008 was 182 and the CPI in 2009 was 195. The inflation rate over the period from 2008-2009 was equal to
7.1%
Your father earned $34,000 per year in 1984. To the nearest dollar, what is that equivalent to in 2014 if the CPI in 2014 is 215 and the CPI in 1984 is 104?
70,288
Suppose an economy is given by the following: Population = 229 million Labor force = 118 million The number of people employed = 108.6 million The number of people unemployed = 9.4 million Given the information above, the unemployment rate is
8.0%
Maria Tivlinsky and Harry Davis, both interns at an economics research institute in the country Southville, are discussing the effects of the increase in the supply of unskilled labor in the economy. Maria says that the average nominal wage paid to unskilled labor is likely to fall. This, according to her, would cause firms to hire more workers and will reduce unemployment in the country. Harry however, does not think that unemployment will necessarily fall; too many workers looking for jobs could depress wages and employment prospects on the whole. It was observed that overall employment in the country did not increase during the next year. Which of the following, if true, would explain this?
Although the economy is said to be recovering from a recession, prices of goods and services are still falling.
Which of the following is not a cost created by high inflation?
Inflation causes the real wage to fall which means that firms have to pay more for workers.
At the start of the year, the rate of unemployment among U.S. citizens who were between 50 to 60 years old was 7 percent. At the end of the year, the same age-group reported an unemployment rate of 6 percent. However, a newspaper columnist claims that the falling unemployment rate is not an accurate indicator of the overall employment situation of this age-group. Which of the following, if true, would strengthen the columnist's claim?
Most people in this group who lost their jobs stopped actively looking for new work.
Albanda is an agrarian economy located in South Asia. Shen Chou and her friend Wang Tao are discussing the efficacy of the Consumer Price Index. Shen, who works with a nonprofit organization, says that the Consumer Price Index does not reflect the realities of consumption patterns of the average consumer. Wang, a policy planner, says that it must be accurate because it was updated only a year ago. Which of the following, if true, would strengthen Shen's argument?
Pensioners whose benefit payments are directly linked to the changes in CPI reported a decreased purchasing power compared to the previous year
The working-age population in Concordia was estimated to be 6.5 million in a certain year. The country's labor department announced that the total number of unemployed people in the country had gone up to 460,000 during this year while, the total number of people out of the labor force decreased to 2,000,000. Oscar Lewis, a student of labor economics believes that the labor department data is flawed. Which of the following, if true, would strengthen the argument that the data understates unemployment? The government of Concordia adopted expansionary fiscal policies in the last two years with the aim of increasing employment. However, the government has been unable to bring down the unemployment rate in the country. Which of the following, if true, best explains this outcome?
Skilled workers who were forced to shift to part-time jobs because of an economic downturn are also considered employed. The government implemented a generous welfare plan 3 years ago to support people who cannot find work.
In April 2017, the working-age population of the United States was 254.6 million. The working-age population is divided into those in the labor force (160.2 million) and those not in the labor force (94.4 million). The labor force is divided into the employed (153.2 million) and the unemployed (7.1 million). Those not in the labor force are divided into those not available for work (88.7 million) and those available for work (5.7 million). Finally, those available for work but not in the labor force are divided into discouraged workers (0.5 million) and those currently not working for other reasons (5.2 million). Use this data to help determine which one of the following statements is true:
The unemployment rate is [(7.1 million)/(160.2 million)] x 100 = 4.4% The labor force participation rate is [(160.2 million)/(254.6 million)]x100= 62.9%
indicate whether the following statement is true or false and why. "A wage rising slower than the rate of inflation is actually falling."
True. If wages are increasing slower than the average price of goods and services, purchasing power falls.
Why is the unemployment rate, as measured by the Bureau of Labor Statistics, an imperfect measure of the extent of joblessness in the economy?
Underemployed people are considered employed, It fails to account for illegal activities, It does not account for inaccurate responses to the Current Population Survey, Discouraged workers are not considered unemployed.
John Smith, a factory worker at an automobile plant in the city Detrigan, makes $25 per hour. His dad, Larry Smith who retired from a plant in the same city ten years back, was earning an average of $10 per hour at the time of retirement. Looking at the CPI, John concludes that a factory worker's purchasing power is lower now compared to ten years ago. Larry, however, does not agree that purchasing power has fallen. According to him, this conclusion cannot be drawn from such limited data. Which of the following, if true, would weaken John's claim that the average factory worker's purchasing power has fallen?
With the removal of import barriers last year, cheaper and better-quality goods are now available in the country
Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there aren't any jobs available. You would be counted as
a discouraged worker
What index is used to measure the average prices paid by a typical family? An average of the prices of the goods and services purchased by a typical family is the:
consumer price index (CPI)
_________ is unemployment caused by a recession as output (GDP) is increasing, the amount of cyclical unemployment would _________
cyclical unemployment ; decrease
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?
cyclically unemployed
When the economy is at full employment, which types of unemployment remain?
frictional and structural
Suppose John Q. Worker is currently unemployed. Each day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of skills, abilities, and interests. If someone asks John Q. what he does for work, he tells them that he is currently "in-between jobs." Which of the following best classifies John Q.'s unemployment status?
frictionally unemployed
since the late 1940s the overall labor force participation rate
has risen because the decline in the labor force participation rate of adult men has been more than offset by the increase in the labor force participation rate of adult women.
The BLS surveys 30,000 households on their spending habits. The results are used to construct a market basket of goods and services purchased by the typical urban family of four. The chart on the right shows these goods and services grouped into eight broad categories for December 2016. The percentages represent the expenditure shares of the categories within the market basket. (Figure 9.28) Which of the following categories make up about three-quarters of the market basket?
housing, transportation, and food
increases in the minimum wage will
increase unemployment among teenagers.
___________ is the percentage of the working-age population in the labor force.
labor force participation rate
The unemployment rate in the United States is usually ________ than the unemployment rates in most other high-income countries, partly because the United States has _________ requirements for the unemployed to receive government payments.
lower ; more stringent
unemployment rates are
lower for college graduates than for people without a high school degree, and vary greatly among ethnic groups
Even perfectly anticipated inflation imposes costs. Why?
menu costs, some wages will fail to keep up with anticipated inflation, paper money loses its purchasing power by the rate of inflation
the unemployment rate
shows the percentage of the labor force that is considered unemployed
ow does the U.S. economy create and destroy millions of jobs each year?
some businesses are expanding, while others are contracting; in the market system, new firms are constantly entering and exiting various industries
Bob Wesley believes that structural unemployment should be eliminated in order for an economy to be healthy. In making this argument, which of the following relevant issues is he ignoring?
structural unemployment will exist in an economy that is innovative
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?
structurally unemployed
Why do economists believe that setting a goal of zero percent unemployment is not feasible or desirable? Creating a goal of zero percent unemployment for an economy is not feasible nor is it desirable because
the economy needs some short-term unemployment in order to allow for better matching of jobs with workers that possess the proper skill sets.
The "normal" underlying level of unemployment in the economy is
the full employment rate of unemployment, the sum of structural unemployment and frictional unemployment, the natural rate of unemployment
the BLS collects price statistics from traditional full-price retail stores, which do not reflect the prices some consumers pay by shopping at discount stores or on the Internet. This is a description of which bias?
the outlet bias
changes in the CPI overstate the true inflation rate due to four "biases." If apple prices rise rapidly during the month while orange prices fall, consumers will reduce their apple purchases and increase their orange purchases. Which of the four biases is concerned with this consumer behavior?
the substitution bias
How do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment rate?
they decrease the opportunity cost of job search
How would it affect the unemployment rate if the Bureau of Labor Statistics counted as unemployed both (1) discouraged workers and (2) people who work part-time but would prefer to work full-time?
unemployment rate would increase
