Chapter 7 Econ

The ratio of total output to the total number of worker hours measures

productivity

The difference between the interest rate on a loan and the inflation rate is the

real interest rate

In 2021 Mr. Howard had 100,000 in savings account. In the end of year, he was paid an interest rate of 5% on his savings. The inflation rate was 7%. What was the real interest rate Mr. Howard earned in 2021? *𝑹𝒆𝒂𝒍 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒓𝒂𝒕𝒆=𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒓𝒂𝒕𝒆 𝒐𝒏 𝒍𝒐𝒂𝒏−𝒊𝒏𝒇𝒍𝒂𝒕𝒊𝒐𝒏 𝒓𝒂𝒕𝒆 𝑹𝒆𝒂𝒍 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒓𝒂𝒕𝒆=𝟓%−𝟕%=−𝟐% It means that due to high inflation the purchasing power of his real return on saving declined by 2%.

-2%

Which of the following is not considered capital

10,000 US Dollars

Which of the following is not considered capital?

10,000 US Dollars

If there are 1,500 people in the population; 800 are employed; and 200 are unemployed, what is the a) unemployment rate and b) labor force participation rate?

20%; 67%

If the consumer price index (CPI) was 92 in 2016, 100 in 2017, 105 in 2018, 107 in 2019, then the base year must be: *𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐶𝑃𝐼^1982−1984 =96.5+99.6+103.9/3 =300/3=100

2017

If the consumer price index (CPI) was 97 in 2017, 100 in 2018, and 102 in 2019, then the base year must be *in base year the CPI=100

2018

If the CPI in 2015 was 100 and the CPI in 2016 was 125, then the rate of inflation between 2015 and 2016 was *% change in price = [(CPI in current year ÷CPI in an original year) *100] − 100 II. % change in price= = CPI in current year−CPI in original year/CPI in an original year *10

25%

People are counted as unemployed if they do not have a job but are available for work and have been actively seeking work for the previous _____ weeks.

4

If the current year's consumer price index is 230 and last year's consumer price index was 220, then the rate of inflation is *% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑝𝑟𝑖𝑐𝑒 = (𝐶𝑃𝐼 𝑖𝑛 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟 −𝐶𝑃𝐼 𝑖𝑛 𝑜𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑦𝑒𝑎𝑟 )/𝐶𝑃𝐼 𝑖𝑛 𝑜𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑦𝑒𝑎𝑟 ∗ 100

4.55

if Tom's salary was $40,000 last year, and this year he receives a cost-of-living increase tied to the consumer price index (CPI), what will his salary be this year assuming the CPI has risen from 102 to 105 *% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑝𝑟𝑖𝑐𝑒 = [(𝐶𝑃𝐼 𝑖𝑛 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟/ 𝐶𝑃𝐼 𝑖𝑛 𝑜𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑦𝑒𝑎𝑟) ∗ 100] - 100

41,177

If frictional unemployment is 2%, structural unemployment is 3%, and cyclical unemployment is 3.5%, the natural rate of unemployment is ______. *Natural rate of unemployment=Frictional unemployment + Structural unemployment Natural rate of unemployment=2% + 3%=5%

5%

If frictional unemployment is 3%, structural unemployment is 2.5%, and cyclical unemployment is 4%, the natural rate of unemployment is ______.

5.5%

If Susan's salary was $50,000 last year, and this year she receives a cost-of-living increase tied to the consumer price index (CPI), what will her salary be this year assuming the CPI has risen from 103 to 106?

51,456

if the CPI in 2015 was 114.7 and the CPI in 2016 was 124.5, then the rate of inflation between 2015 and 2016 was *% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑝𝑟𝑖𝑐𝑒 = (𝐶𝑃𝐼 𝑖𝑛 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑦𝑒𝑎𝑟 −𝐶𝑃𝐼 𝑖𝑛 𝑜𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑦𝑒𝑎𝑟 )𝐶𝑃𝐼 𝑖𝑛 𝑜𝑟𝑖𝑔𝑖𝑛𝑎𝑙 𝑦𝑒𝑎𝑟 ∗ 100

8.5%

Which price index calculates the prices for urban consumers paid on fixed basket of goods and services?

CPI

A paragraph from the report discussed in the UN Department of Economic and Social Affairs states that "With the rapid technological advancement of recent years, computers are increasingly encroaching on domains that were previously considered exclusively human. The astonishing progress in such areas as artificial intelligence (AI), robotics, 3D printing and genetics has enabled computers to perform the tasks of architects, medical doctors, music composers and even a 16th century Dutch master of painting. Nearly every day brings news of remarkable feats achieved by computers or robots, and with them a gnawing question. What type of unemployment is discussed in the UN report?

Structural

What is a person's classification if he or she has given up actively looking for work?

a discouraged worker/discouraged job seeker

If there are 1,400 people in the population; 700 are employed; and 100 are unemployed, what is the a) unemployment rate and b) labor force participation rate? *Unemployment rate= 𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑/𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑+𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑 =𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑/𝐿𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒= 100/700+100 =100/800 *L𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒 𝑝𝑎𝑟𝑡𝑖𝑐𝑖𝑝𝑎𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒=𝐿𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒/𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 =700+100/1,400=

a) 12.5%; b) 57.14%

In the CPI market basket, the category which has the largest weight is

housing

Suppose that anticipated inflation is 3% for the coming year. The loan contracts are set at 7% with the expectation of a 4% return after inflation. If the actual inflation rate at the end of the year is 2% Note: Debtors (borrowers); Creditors (lenders) Think about the real interest rate (return) and who will benefit from it.

creditors gain at the expense of debtors

_____ unemployment is the result of changes in the business cycle.

cyclical

Suppose that anticipated inflation is 5 % for the coming year, with loan contracts set at 9% with the expectation of a 4% return after inflation. If the actual inflation rate at the end of the year is 6%

debtors gain at the expense of creditors

Other things equal, if a recession gets worse, the number of discouraged workers _____, and the number of those in the labor force _____.

increases; decreases

Taylor resigned from the job and decided to stay at home for a while. What is the impact of Taylor's decision on the labor-force participation rate? Recall: Labor force participation rate=Labor force/Population

it decreases

All of the following explain the growth in output per worker hour during the 20th century except

the worker-capital ratio decreased during that period.