Chapter 8 Questions

Menu costs are the

real costs of changing listed prices

Labor Force Distribution. The total population is _____ million

278

Employment Data. If marginally attached workers are included in the labor force, the labor force is _____ million

33

If the actual unemployment rate is 7% and the cyclical unemployment rate is 2%, then the natural rate of unemployment is

5%

Which federal agency calculates and reports the official unemployment rate?

Bureau of Labor Statistics

Suppose that a bank wishes to make a 5% rate of return on a one-year loan but expects inflation over the course of the loan to be roughly 3%. Which statement is TRUE?

If the bank charges 8% and the inflation rate is less than 3%, then the bank will have earned a higher rate of return than expected

The Effect of a Minimum Wage. Suppose the labor market is in equilibrium at E when the government imposes a minimum wage of WF. Structural unemployment, assuming all workers without a job are searching, will equal:

QS - QD

Unemployment that is due to the time workers spend in job search is _____ unemployment

frictional

The natural level of unemployment contains no_____ unemployment

cyclical

Internet employment agencies have simplified the job search for the applicants. They have also led to a(n) _____ unemployment

decrease in frictional

Deflation is a

decreasing aggregate price level

When labor unions successfully bargain for wage rates that are _____ the equilibrium wage rate, they may cause _____.

higher than; an increase in structural unemployment

When the unemployment rate is high, there is political demand to increase the benefit period for unemployment compensation. In a standard analysis, doing so will lead to

increases in the unemployment rate

To be officially unemployed, a person must

not have a job and must have looked for work in the past four weeks

A survey reveals that, on a small island, initially 100 people have jobs, 25 people don't have jobs but are looking for jobs, and 45 people are neither working nor looking for work. Suppose that 15 of the 45 people who weren't looking for work now begin looking for work. There are now 40 people looking for work and 100 people working. The unemployment rate

rises to 28.6%

Shoe-leather costs are the costs of

the increased number of transactions as inflation increases

The unemployment rate is the ratio of all of the people

unemployed to those in the labor force

During a recession

unemployment increases and the growth rate of real GDP decreases