ECO2013 - Chapter 9
How does the U.S. economy create and destroy millions of jobs each year? (Mark all that apply.) A. In the market system, new firms are constantly entering and exiting various industries. B. Some businesses are expanding, while others are contracting. C. When unemployment is high, the federal government hires more workers to offset the effects of unemployment. D. The federal government determines that certain industries are obsolete and closes firms
A. In the market system, new firms are constantly entering and exiting various industries. B. Some businesses are expanding, while others are contracting.
What formula does the Bureau of Labor Statistics use to calculate the unemployment rate?
# of unemployed _________________________ Labor force X 100 = Unempl. rate
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? $16,447 $70,288 $34,000 $73,100
70,288 value in 1984 X ( CPI in 2014/CPI in 1984)
As of August 2015, which of the following demographic groups has the highest unemployment rate? Whites African Americans Hispanics Asians
African american
The BLS uses the establishment survey to collect information on employment in the economy. Indicate one drawback of the establishment survey compared to the current population survey and indicate one advantage. A. It is based on unverifiable, self-reported survey responses. B. It includes complete information about unemployment. C. It does not include information about self-employed people. D. It is based on company payroll and not on unverifiable answers.
C. It does not include information about self-employed people. D. It is based on company payroll and not on unverifiable answers.
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? Seasonally unemployed Frictionally unemployed Structurally unemployed Cyclically unemployed
Frictional Unemployment = Short-term unemployment that arises from the process of matching workers with jobs.
Suppose the fixed interest rate on a loan is 5.75% and the rate of inflation is expected to be 4.25%. The real interest rate is 1.5%. Suppose now that instead of 4.25%, the inflation rate unexpectedly reaches 5.5%. Who gains and who loses from this unanticipated inflation? (Mark all that apply.) Borrowers lose from a lower real interest rate. Lenders lose from a lower real interest rate. Lenders gain from a lower real interest rate. Borrowers gain from a lower real interest rate.
Lenders lose from a lower real interest rate. Borrowers gain from a lower real interest rate.
Which of the following can give an early warning of future increases in the price level? Producer price index GDP deflator Consumer price index All of the above
Producer price index (PPI) An average of the prices received by producers of goods and services at all stages of the production process.
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? Frictionally unemployed Seasonally unemployed Cyclically unemployed Structurally unemployed
Structurally unemployed
How do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment rate? They are paid as long as the unemployed person remains unemployed. The payments are costly and firms are forced to lay off workers. They increase the opportunity cost of job search. They decrease the opportunity cost of job search.
They decrease the opportunity cost of job search.
Indicate whether the following statement is true or false and why. "A wage rising slower than the rate of inflation is actually falling." False. A higher wage increases purchasing power regardless of inflation. True. If wages are increasing slower than the average price of goods and services, purchasing power falls. False. A higher wage decreases purchasing power regardless of inflation. True. If wages are increasing slower than the average price of goods and services, purchasing power increases.
True. If wages are increasing slower than the average price of goods and services, purchasing power falls.
Even perfectly anticipated inflation imposes costs. Why? Menu costs. Paper money loses its purchasing power by the rate of inflation. Some wages will fail to keep up with anticipated inflation. All of the above. A and C only.
all of the above
When the economy is at full employment, all remaining unemployment is either frictional or structural. the natural rate of unemployment prevails. the unemployment rate is greater than zero. All of the above.
all of the above
When compared to the Great Depression, the typical length of unemployment in the modern (post-Great Depression-era) U.S. economy is A. significantly longer. B. relatively brief. C. slightly longer. D. approximately the same.
relatively brief
The true cost of borrowing and lending is best measured by the three-month U.S. Treasury bill rate. the real interest rate. the nominal interest rate. the inflation rate.
the real interest rate
Consider the following table: Year Nominal Average Hourly Earnings 2009 $17.00 207 What is the real average hourly wage in 2009? $17.42 $7.92 $8.21 $8.61
$8.21 Nominal Hour wage/CPI X 100 To correct for the effects of inflation, we can divide a nominal variable by a price index and multiply by 100 to obtain a real variable. The real variable will be measured in dollars of the base year for the price index. To calculate real average hourly earnings for a given year, divide the nominal average hourly wage for that year by a price index for that year and multiply by 100.
According to Costco's CEO, Jim Sinegal: "Paying good wages and keeping your people working for you is good business...Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you." What is Costco's CEO referring to? Structural unemployment Efficiency wages Marketing strategies Union contracts
Efficiency wage: A higher-than-market wage that a firm pays to increase worker productivity.
Which of the following causes changes in the CPI to overstate the true inflation rate? Substitution bias New product bias Increase in quality bias All of the above
all of the above
Why is the unemployment rate, as measured by the Bureau of Labor Statistics, an imperfect measure of the extent of joblessness in the economy? A. Underemployed people are considered employed. B.Discouraged workers are not considered unemployed. C. It does not account for inaccurate responses to the Current Population Survey. D. It fails to account for illegal activities. E. All of the above.
all of the above
If a 3-month Treasury bill pays 5.5% and the change in the consumer price index (CPI) is 4.7%, what is the real interest rate (the true return to lending)? 10.2% 0.8% 4.7% 5.5%
.08% nominal - inflation
What effect do labor unions have on the unemployment rate? Since few non-government workers are unionized, there is no significant effect on the unemployment rate. By increasing the wage above market equilibrium, labor unions considerably increase the unemployment rate. Labor unions can significantly increase the unemployment rate when members go on strike. By increasing the wage above market equilibrium, labor unions considerably decrease the unemployment rate.
Since few non-government workers are unionized, there is no significant effect on the unemployment rate.
