AP macro modules 10-15

At the trough of the business cycle, cyclical unemployment positive and the actual unemployment rate ________ the natural rate of unemployment

exceeds

True or False: Efficiency wages may cause frictional unemployment

false

Job search refers to the time workers spend looking for employment Job search results in

frictional unemployment

The natural rate of unemployment is

frictional unemployment plus structural unemployment

Shoe-leather costs refer to

increased costs of of transactions due to inflation

Inflation doesn't reduce purchasing power if:

it causes an increase in nominal wages equivalent to the rate of inflation

In a period of unexpected deflation,

lenders benefit, since they are repaid dollars with greater real value than they anticipated when signing the loaning contract

When inflation rises quickly:

lenders will be hurt and borrowers will benefit

The presence of discouraged workers in the economy tends to

lower the official unemployment rate

The threat of future inflation

makes people reluctant to lend money for long periods

What is the consumer price index

most widely used measure of inflation in the United States

Is Susy's leather goods manufactures leather pieces that are sold to manufacturer's who use them to produce handbags and wallets included in the calculations of the GDP?

no

To be classified as unemployed, a worker must

not have a job and must be actively looking for work.

Inflation can be measured by

percentage change in the consumer price index

Alex expects the inflation rate to be 4%. If Alex borrows money at a nominal interest rate of 5%, his real interest rate is:

positive and less than the nominal interest rate

Disinflation in an economy which has grown to expect inflation is

possible only if policymakers are willing to expect higher rates of unemployment and a lower level of aggregate output

If money income remains the same, while the average price level doubles, then:

real income will fall

The natural rate of unemployment is

the sum of frictional and structural unemployment

Is the following statement true: structural unemployment occurs when when there is a surplus of labor at the current wage rate.

true

The costs arising from the way inflation makes money a less reliable unit of measurement are known as:

unit of account costs

efficiency wages encourage

workers to retain their current job

What are the two goals of macroeconomic policy?

Price stability and low unemployment

The labor force is defined as

The total number of employed and unemployed workers in the economy.

Deflation is a

a decrease in the average level of prices

C + I + G + X - IM is the value of

all final goods and services produced in an economy during a given time period.

The consumer price index reflects

changes in the prices of goods and services typically purchased by consumers.

The extra time and effort to make transactions due to inflation imposes

shoe leather costs

The invention of the ATM machines reduced:

shoe-leather costs of inflation.

The unemployment rate is the total number of individuals classified as unemployed divided by the

size of the labor force

The rate of unemployment that exists when the economy is at full employment is:

the natural rate of unemployment