AGEC 1010 Chapter 8
What most accurately describes how to calculate the unemployment rate
(Unemployed / labor force) × 100
Unit of account costs
(of inflation) costs arising from the way inflation makes money a less reliable unit of measurement.
Shoe leather costs
(of inflation) the increased costs of transactions caused by inflation.
According to this table February 2009 212.2 February 2010 216.7 February 2011 221.6 February 2012 224.6 the inflation rate between 2011 and 2012 is
1.4%
Most economists agree that a binding minimum wage
contributes to structural unemployment
The deviation of the actual rate of unemployment from its natural rate is known as
cyclical unemployment.
Individuals who give up looking for work because they don't feel that there are good prospects of finding a job are known as
discouraged workers
A drop in the inflation rate is called
disinflation
The natural rate of unemployment is
equal to the sum of frictional and structural unemployment
U.S. data from the past 60 years shows that
falling real GDP is always associated with a rising rate of unemployment
In general, expansions are characterized by
falling unemployment
For most of U.S. modern economic history, when the unemployment rate is _____, real GDP is _____
falling; rising
An example of structural unemployment is a(n): real estate agent who leaves a job in Texas and searches for a similar, higher-paying job in California. worker at a fast-food restaurant who quits work and attends college. autoworker who is temporarily laid off from an automobile company because of a decline in sales. geologist who is permanently laid off from an oil company because of an increase in wages won by labor unions.
geologist who is permanently laid off from an oil company because of an increase in wages won by labor unions.
Minimum wage laws are imposed with the goal of
helping workers earn enough to afford a basic lifestyle.
Real income
income divided by the price level.
Discouraged workers
individuals who want to work but who have stated to government researchers that they aren't currently searching for a job because they see little prospect of finding one given the state of the job market.
The inflation rate
is the annual rate of increase in the price level
Cyclical unemployment
is the share of unemployment arising from the business cycle
Unit-of-account costs refer to the
loss of the reliability of money as a relative unit of measurement
Unexpected deflation
makes it harder for borrowers to repay their loans
The threat of future inflation
makes people more reluctant to lend money for long periods
Costs associated with changing a listed price are known as
menu costs
Labor unions contribute to structural unemployment by
negotiating for wages above the equilibrium level
Marginally attached workers
nonworking individuals who say they would like a job and have looked for work in the recent past but are not currently looking for work.
The rate of unemployment is found by dividing the
number of people looking for work by the number of people looking for work plus the number of people employed
The wage divided by the price level is known as the
real wage
Efficiency wages are
set above equilibrium wages to act as an incentive for better performance
Labor force participation rate
the percentage of the population age 16 or older that is in the labor force.
Unemployment rate
the percentage of the total number of people in the labor force who are unemployed, calculated as unemployment/(unemployment + employment)
The unemployment rate is
the portion of the labor force unemployed
Interest rate
the price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year.
Disinflation is
the process of bringing about a decline in the inflation rate
Disinflation
the process of bringing down inflation that has become embedded in expectations
Menu costs
the real cost of changing a listed price
Actual unemployment is equal to
the sum of cyclical unemployment and natural unemployment
Labor force
the sum of employment and unemployment; that is, the number of people who are currently working plus the number of people who are currently looking for work.
Natural unemployment is equal to
the sum of frictional unemployment and structural unemployment
Employment
the total number of people currently employed for pay in the economy, either full-time or part-time.
Unemployment
the total number of people who are actively looking for work but aren't currently employed.
Real wage
the wage rate divided by the price level
Structural unemployment occurs when
the wage rate is persistently above its equilibrium level
The natural rate of unemployment rises when
there are more new entrants to the labor force
Frictional unemployment
unemployment due to time workers spend in job search.
Structural unemployment
unemployment that results when there are more people seeking jobs in a labor market than there are jobs available at the current wage rate.
Efficiency wages
wages that employers set above the equilibrium wage rate as an incentive for workers to deliver better performance.
Data on the U.S. economy indicate that
when the unemployment rate is low, most unemployment is frictional
Job search
when workers spend time looking for employment.
Employment is the total number of people
who are working either full or part time
In 2011, 10 million people did not have a job but were actively looking for employment and 85 million people had either a full-time or a part-time job. Based on this information, the unemployment rate in 2011 was
10.5%
If the actual unemployment rate is 7% and the natural rate of unemployment is 5% then the cyclical unemployment is
2%
Suppose that the nominal rate of interest is 7% and the inflation rate is 3%. The real rate of interest is equal to
4%
In 2010, _______ percent of unemployed workers were considered long-term unemployed.
43
If there are 100 million people in the total population, a labor force of 50 million, and 47 million employed workers, the unemployment rate is
6%
According to the table Full time employed 20 million Not working but looking for work 2 million Part time employed 10 million Discouraged workers 1 million the unemployment rate is
6.25%
The unemployment rate is based on numbers collected from a monthly survey of _______ families
60,000
Which of the following individuals would be counted as unemployed? A marginally attached worker A discouraged worker A worker who is underemployed An individual who is currently not working, but is looking for work in a high-paying industry
An individual who is currently not working, but is looking for work in a high-paying industry
The official unemployment rate ignores
Discouraged workers who have given up looking for a job
Last month Brent lost his job at the auto parts factory because his factory, like many factories, relocated to Asia. Brent has bee looking for similar factory jobs in his town but has found no openings. Brent is best classified as
Structurally unemployed
Which federal agency calculates the official unemployment rate
The Bureau of Labor Statistics
Last month Brent lost his job at the auto parts factory because his factory, like many others, relocated to Asia. Brent and his former co-workers have been looking for similar factory jobs in the town, but they have found no openings. Which of the following best describes what has happened to the labor market in Brent's town?
The demand for labor has fallen
Which of the following is TRUE concerning interest rates? The real interest rate can only be positive. The real interest rate cannot be negative. The real interest rate can be zero, positive, or negative. The nominal interest rate can be negative.
The real interest rate can be zero, positive, or negative.
Which labor market measure includes the underemployed, discouraged workers, and marginally attached workers along with as a measure of labor under utilization
U6
Which of the following statements is FALSE? In general, there is a trade-off between inflation and unemployment in the short run. There is a strong negative relation between growth in real GDP and changes in unemployment. Unemployment always rises during recessions. Unemployment always falls during expansions.
Unemployment always falls during expansions
Unemployment rates are usually higher in Europe than in the United States because
Unemployment benefits are more generous in Europe than in the United States
Which of the following is true? Unexpected inflation benefits borrowers and hurts lenders. Unexpected inflation benefits borrowers but does not affect lenders. Unexpected inflation benefits lenders and hurts borrowers. Unexpected deflation benefits lenders but does not affect borrowers.
Unexpected inflation benefits borrowers and hurts lenders
Internet employment agencies have simplified the job search for the applicants. They have also led to
a decrease in frictional unemployment
Jobless recovery
a period in which GDP growth rate is positive but the unemployment rate is still rising.
An efficiency wage is
a wage set above the equilibrium level in order to motivate employee performance
To be considered unemployed a person must
be currently not working but actively seeking employment
If the actual inflation rate is higher than expected,
borrowers gain at the expense of lenders
Deflation is a
decrease in the average level of prices
When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum, economists say that Emily is experiencing a
shoe-leather cost
Increased costs of transactions caused by inflation are known as
shoe-leather costs.
Unemployment that results when there are more people seeking jobs in a labor market than there are jobs available is called
structural unemployment
A persistent surplus of job-seekers in a particular market gives rise to what is known as
structural unemployment.
Cyclical unemployment is equal to
the difference between actual unemployment and natural unemployment
Cyclical unemployment
the difference between the actual rate of unemployment and the natural rate of unemployment.
When there is deflation in the economy
the general price level falls
Nominal interest rate
the interest rate in dollar terms.
The sum of employment and unemployment is known as
the labor force.
If there are discouraged workers,
the measured unemployment rate may understate the percentage of people who would like to work but are unable to find jobs
Real interest rate
the nominal interest rate minus the inflation rate.
natural rate of unemployment
the normal unemployment rate around which the actual unemployment rate fluctuates; the unemployment rate that arises from the effects of frictional and structural unemployment.
Underemployment
the number of people who work part-time because they cannot find full-time jobs.