Econ 104 Exam 2
The "normal" underlying level of unemployment in the economy is
-the full employment rate of unemployment -the natural rate of unemployment -the sum of structural unemployment and frictional unemployment
Which one of the following is not a measure of the price level?
Government Price Index: an average of the prices paid by the government for goods and services used only by different government agencies
what is the relationship between frictional unemployment and job search
People are said to be frictionally unemployed when they are between jobs and searching for new jobs.
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.
Currently, the Bureau of Labor Statistics does not include homemakers in its employment and labor force totals. What would happen to the unemployment rate and the labor force participation rate LOADING... if homemakers were included in these numbers?
The unemployment rate would decrease and the labor force participation rate would increase.
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?
The unemployment rate would increase.
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.
a discouragaed worker
producer price index
an average of the prices received by producers of goods and services at all stages of the production process.
nominal variable
are calculated in current year prices, is the stated interest rate whereas the real interest rate
real variable
are measured in dollars of the base year for the price index to correct the effects of inflation, the nominal interest rate minus the inflation rate
Unemployment rates are lower for
college graduates than for people without a high school degree, and vary greatly among ethnic groups.
The price index which is used to measure changes in the cost of living is the
consumer price index ( CPI)
Which is not considered one of the potential biases in calculating the consumer price index?
coverage bias
workers who lose their job because of a recession
cyclical
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
When a company reduces production and employment during economic recessions, those employees who lose their jobs are generally considered to be
cyclically
When an unemployed person drops out of the labor force, it
does not affect the employment population ratio
The short-term unemployment that arises from the process of matching workers with jobs is called
frictional
When the economy is at full employment, which types of unemployment remain?
frictional and structural
A person who is in between jobs but actively engaged in a job search is considered to be
frictionally
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
The minimum wage law
has only a small effect on the unemployment rate since only a small part of the labor force earns the minimum wage
does inflation increase of decrease the burden on borrowers
increase bc when they pay back the money it is worth more than when they received it
Government unemployment insurance tends to
increase the unemployment rate by lowering the opportunity cost of job search.
An efficiency wage
increases the unemployment rate since firms pay a higher-than-market wage that increases the quantity of labor supplied.
establishment survey
interviews businesses and measures total employment in the economy.
consumer price index
is an average of the prices of the goods and services purchased by the typical urban family of four,
the real interest rate
is equal to the nominal interest rate minus the inflation rate.
The percentage of the working-age population in the labor force
labor force participation rate
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.
outlet bias
inflation can affect the distribution of income because
people with incomes rising faster than the rate of inflation enjoy an increasing purchasing power, while people with incomes rising more slowly than the rate of inflation are hurt by a decreasing purchasing power.
The employment-population ratio measures the
percentage of the working age population that is employed.
The payment of government unemployment insurance reduces the severity of recessions by
preventing a huge drop in income and spending for the unemployed.
deflation
price level decreasing
disinflation
prices increasing at a decreasing rate
The effect of labor unions on overall unemployment is......since only a........ percentage of the labor force outside the government is unionized.
small, small
he type of unemployment most likely to result in hardship for the people who are unemployed is
structural because this type of unemployment requires retraining to acquire new job skills.
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called
structural unemployment.
Experts in hand-drawn animation who remain unemployed due to the film industry's switch to computer-generated animation are considered to be
structurally
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
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.
substitution bias
Which of the following causes changes in the CPI to overstate the true inflation rate?
substitution bias new product bias increase in quality bias
Menu costs are
the cost to firms of changing prices
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.
what economist prefer what type of survey? Household or establishment
the establishment survey bc it is determined by actual payroll records rather than unverified answers
household survey
the household survey interviews households and collects data that is used to measure the unemployment rate
When the economy is at full employment, unemployment is equal to
the natural rate of unemployment
When the economy is at full employment,
the natural rate of unemployment prevails all remaining unemployment is either frictional or structural the unemployment rate is greater than zero
if the economy is experiencing deflation
the nominal interest rate will be lower than the real interest rate
The unemployment rate in the United States typically has been lower than the unemployment rates in Canada and countries in Western Europe because
the opportunity cost of job search is lower in Canada and countries of Western Europe and unemployed workers in those countries search longer for jobs.
the unemployment rates shows
the percentage of the labor force that is considered unemployed
the natural rate of unemployment is
the sum of structural unemployment and frictional unemployment
The type of inflation that is a greater problem to society is
unanticipated inflation, since it causes greater redistribution of income between those making payments and those awaiting payments in the future.
When an unemployed person drops out of the labor force, the unemployment rate
understates the true degree of joblessness in the economy.
To have no substitution bias, the demand curves for the products in the market basket would need to be
vertical