Eco 2301: Chapter 9
What is the real average hourly wage in 2009?
8.21
Indicate whether the following statement is true or false and why. "A wage rising slower than the rate of inflation is actually falling."
True. If wages are increasing slower than the average price of goods and services, purchasing power falls.
When the economy is at full employment,
all remaining unemployement is either frictional or structural, the natural rate of unemployement prevails, the unemployment rate is greater than zero.
When compared to the Great Depression, the typical length of unemployment in the modern (post-Great Depression-era) U.S. economy is
relatively brief
Your father earned $34,000 per year in 1984. To the nearest dollar, what is that equivalent to in 2014 if the CPI in 2014 is 215 and the CPI in 1984 is 104?
$70,288
Which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment rate?
(Number of unemployed/number in labor force)x 100
If a 3-month Treasury bill pays 5.5% and the change in the consumer price index (CPI) is 4.7%, what is the real interest rate (the true return to lending)?
0.8%
Consumer Price Index
An average of the prices of the goods and services purchased by the typical urban family of four.
What can be said about real average hourly earnings and nominal average hourly earnings between 2008 and 2010?
Both real and nominal average hourly earnings increased.
Frictional Unemployment
Short-term unemployment that arises from the process of matching workers with jobs.
What effect do labor unions have on the unemployment rate?
Since few non-government workers are unionized, there is no significant effect on the unemployment rate.
How does the U.S. economy create and destroy millions of jobs each year?
Some businesses are expanding, while others are contracting. In the market system, new firms are constantly entering and exiting various industries.
Structural Unemployment
Structural Unemployment
Real interest rate
The nominal interest rate minus the inflation rate.
Natural rate of unemployment
The normal rate of unemployment, consisting of frictional unemployment plus structural unemployment.
Nominal interest rate
The stated interest rate on a loan.
How do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment rate?
They decrease the opportunity cost of job search.
Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics degree, what is the best classification of her unemployment status?
structurally unemployed
Suppose John Q. Worker is currently unemployed. Each day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of skills, abilities, and interests. If someone asks John Q. what he does for work, he tells them that he is currently "in-between jobs." Which of the following best classifies John Q.'s unemployment status?
frictionally unemployed
