Chapter 9 macro

relative to the household survey, what is a strength of the establishment survey

it is determined by actual payrolls rather than the unverified answers of household survey

labor force

the sum of employed and unemployed workers in the economy

GDP deflator

a better measure of the average prices of all goods and services included in GDP

efficiency wages

a wage higher than the market wage paid by a firm in order to increase worker productivity

Misery Index

adds together the inflation rate and the unemployment rate to give a rough measure of the state of the economy

what would reduce the labor force participation rate

an increase in the working age population

Which market basket specifically targets intermediate goods?

basket used by the producer price index

If consumers purchase fewer of those products that increase most in price and more of those products that decrease in price as compared to the CPI basket, then

changes in the CPI overstate the true rate of inflation.

the CPI is also referred to as

cost of living index

at full employment

cyclical unemployment is zero

Which of the following causes the unemployment rate to understate the true extent of joblessness?

discouraged workers are not counted as unemployed

nominal variables

economic variables that are calculated in current-year prices

If inflation is completely anticipated,

firms lose because they incur menu costs.

when the economy is at full employment which types of unemployment remain

frictional and structural

the "normal" underlying level of unemployment in the economy is

frictional and structural. This is also known as natural rate of unemployment and full employment rate of unemployment

Establishing a state employment agency that speeds up the process of matching unemployed workers with unfilled jobs is an attempt to lower

frictional unemployment

3 categories that make up more than 75% of CPI market basket

housing, transportation, food

employment population ratio

(employment/working age population) x 100

outlet bias

CPI uses full retail price, but many people now buy from discount stores or online

Which of the following is not a cost posed by inflation?

Inflation reduces the affordability of goods and services to the average consumer.

labor force participation rate

labor force/working age population x 100

If inflation increases unexpectedly, then

lenders receive a lower real interest rate than they expected.

in calculating CPI

market basket does not include large equipment purchased by firms

the stated interest rate on a loan

nominal interest rate

real interest rate formula

nominal interest rate - inflation rate

unemployment rate formula

number of unemployed/labor force x 100

discouraged workers

people who are available for work but have not looked for a job during the previous four weeks because they believe no jobs are available for them

The deflation of the 1930s impacted the U.S. economy because it led some consumers to ________ and because it ________.

postpone purchases while they waited for prices to fall even lower; increased the burden on borrowers.

frictional unemployment

short-term unemployment that arises from the process of matching workers with jobs

employed

someone who currently has a job or who is temporarily away from his or her job

unemployed

someone who is not currently at work but who is available for work and who has actively looked for work during the previous month

By offering training to workers whose firms laid them off because of competition from foreign firms, the federal government is attempting to reduce

structural unemployment

inflation rate

the % change in the GDP deflator from one year to the next

during a deflationary period,

the nominal interest rate is less than the real interest rate

unemployment rate

the percentage of the labor force that is unemployed

You agree to lend $1,000 for one year at a nominal interest rate of 10%. You anticipate that inflation will be 4% over that year. If inflation is instead 3% over that year, which of the following is true?

the person who borrowed 1,000 would be worse off as a result of the unanticipated decrease in inflation

Mike has been unemployed for over a year. He hasn't looked for a job in the last three months, but he's just started looking for work again. Because Mike started looking for a new job,

the unemployment rate increased

Since 1950s, the behavior of the annual unemployment rate in the United States demonstrated that

the unemployment rate rises during recessions and falls during expansions

structural unemployment

unemployment arising from a persistent mismatch between the skills and attributes of workers and the requirements of jobs

cyclical unemployment

unemployment that rises during economic downturns and falls when the economy improves

If the minimum wage is set above the market wage

unemployment will rise and be higher than it would be without a minimum wage

real variables

variables that have been corrected to account for the effects of inflation