Macroeconomics

Deflation

a situation in which the price level is falling anf the inflation rate is negative

GDP price index

an average of the current price of all the goods and services included in GDP expresses as a percentage of base year prices

PCE price index

an average of the current prices of the goods and services included in the consumption expenditure component of GDp expressed as a percentage of base year prices

Full emplument occurs when....

cyclical unemplyment is zero

What is not apart of the business cycle?

inflation

If GDP excedes potential GDP, then the unemployment rate ______ the natural unemployment rate

is less than

The CPI is reported once every...

month

Since 1981, the

nominal wage rate increased and the real wage rate did not change by very much

When calculating GDP, purchases of used goods are

not included

The employmeny rate equals 100 multiplied by the...

number of people unemployed divided by the labor force

The unemployment rate equals 100 multiplied by the...

number of people unemployed divided by the labor force

The change in the quality of goods and services that an hour's work can buy is measured by the...

real wage

During a recession the unemployment rate generally______ and during an expansion the unemployment rate generally______.

rises, falls

During a recession, the unemployment rate____ and the percentage of part time workers who are involuntary part time workers _________.

rises, rises

Core inflation rate

the annual percentage change in the PCE price index excluding the prices of food and energy

Depreciation

the decease in the value of capital that results from its use and from obsolescence

Nominal interest rate

the dollar amount if interest expressed as a percentage of the amount loaned

Cyclical unemployment

the fluctuating unemployment over the business cycle that increases during a recession and decreases during an expansion

real interest rate

the goods and services forgone in the amount expressed as a percentage of the amount loaned and calculated as the nominal interest rate minus the inflation rate

The consumer price index market basket contains

the goods and services purchased by an average urban household

Chained-dollar real GDP

the measure of real GDP calculated by the Bureau of Economic Analysis

Output gap

real GDP minus potential GDP expressed as a percentage of potential GDP

CPI

A measure of the average of the prices paid by urban consumers for a fixed market basket of consumption goods and services

Reference base period

A periodfor which the CPI is defined to equal 100. Curent refernce base period is 1982-1984.

Labor force

The number of people employed plus the number unemployed

Unemployment rate

The percentage of the people in the labor force who are unemployed

Structal employment usally lasts ______ period of time _______ unemployment

a longer, than frictional

Discouraged worker

a marginally attached worker who has not made specific efforts to find a job within the past four weeks because previous unsuccssesful attempts to find a job were discouraging

Cost of living index

a measure of the change in the amount of money that people need to spend to achive a given standard of living

Recession

a period during which real GDP decreases for at least two successive quarters

Great Depression

a period of high unemployment, low incomes, and extreme economic hardship that lasted from 1929 to 1939

Business cycle

a periodic but irregular up and down movement of total production and other measures of economic activity

Marginally attached worker

a person who does not have a job, is available and willing to work, has not made specific efforts to find a job within the previous four weeks, but has looked for work in the recent past

In constructing the CPI, the BLS has to deal with commodity substitution bias, which is defined as...

consumers' substition of cheaper goods whose prices increase

The consequence of the CPI is that it...

distorts private contracts

A weakness that could be noted about the unemployment rate is that it...

does not account for the underutliizaion of workers

The real interest rate is negative if the inflation rate

exceeds the nominal interst rate

If consumption was 70 percent of GDP and both investment and government expenditure were 18 percent each, then we see that

exports must be less than imports

What type of unemployment is a permanent and healthy phenomenon in a dynamic economy?

frictional

In the business cycle, what immediatly precedes the time when real GDP is falling?

peak

Full time workers

people who usally work 35 hours or more a week

part time workers

people who usally work less than 35 hours per week

part time for economic reasons

people who work 1 to 34 hours per week but are looking for full time work and cannot find it because of unfavorable business conditions

The inflation rate measures the

percentage change in the CPI from one year to the next year

During a recission

real GDP is less than potentail GDP

Labor force participation rate

the percentage of the working age population who are members of the labor force

Inflation Rate

the prcentage change in the price level from one year to the next

When economists speak of the CPI bias, they are referring to...

the tendency for the CPI to overstate price changes

Working age population

the total number of people aged 16 years and over who are not in jail, hospital, or some other form of institutional care or in the U.S Armed Forces

natural unemployment rate

the unemployment rate when the economy is at full employment

Frictional unemployment

the unemployment that arises from people entering and leavig the labor force, from quitting jobs to find better ones, and from the ongoing creation and destruction of jobs- from normal labor turnover

structural unemployment

the unemployment that arises when changes intechnology or international competition change the skills needed to preform jobs or change the locations of jobs

When cyclical unemployment is zero

the unemploymentrate rate equals the natural unemployment rate

Potential GDP

the value of real GDP when all the economy's factors of production- labor, capital, land, and entrepreneurial ability- are fully employed

Nominal GDP

the value of the final goods and services produced in a given year expressed in terms of prices of that same year

Real GDP

the value of the final goods and services produced in a given year expressed interms of the prices in a base year

Full employment

when there is no cylical unemployment or, equivalently, when all the unemployment is frictional or structural

Is flour used by the baker to make cup cakes a final good?

yes