ECON 2030 Exam 3

structural changes

How can unemployment in the US be solved if it is completely structural?

structural

In the United States, "federal tax laws allow you to deduct your moving expenses if your relocation relates to starting a new job or a transfer to a new location for your present employer. To qualify for the deduction, your new work location must be a sufficient distance from your old home and you must begin working shortly after you arrive." This tax policy is most effective at combating _____ unemployment.

countercyclically; an expansion

In the United States, unemployment rates tend to move ________. This means that when the economy is experiencing _________, unemployment rates decrease, everything else held constant.

2

Structural unemployment occurs because 1) an economy can experience periods of recession 2) there are long-term mismatches between worker's skills and available jobs 3) jobs differ in their location, skills required, and working conditions 4) it takes time to match potential workers and jobs

no

Suppose 15-year-old Joe and his 17-year-old brother Frank are full-time high school students. Suppose further that Joe works 20 hours per week, for pay, at a local fast food restaurant. Frank, on the other hand, does not currently have a job. After constantly hearing about his brother's exciting work adventures, Frank filled out a job application at the same restaurant two weeks ago. While he is eager to begin immediately, Frank has not yet received a response to his application. Is Frank classified as employed?

no

Suppose 15-year-old Joe and his 17-year-old brother Frank are full-time high school students. Suppose further that Joe works 20 hours per week, for pay, at a local fast food restaurant. Frank, on the other hand, does not currently have a job. After constantly hearing about his brother's exciting work adventures, Frank filled out a job application at the same restaurant two weeks ago. While he is eager to begin immediately, Frank has not yet received a response to his application. Is Frank classified as not in the labor force?

yes

Suppose 15-year-old Joe and his 17-year-old brother Frank are full-time high school students. Suppose further that Joe works 20 hours per week, for pay, at a local fast food restaurant. Frank, on the other hand, does not currently have a job. After constantly hearing about his brother's exciting work adventures, Frank filled out a job application at the same restaurant two weeks ago. While he is eager to begin immediately, Frank has not yet received a response to his application. Is Frank classified as unemployed?

yes

Suppose 15-year-old Joe and his 17-year-old brother Frank are full-time high school students. Suppose further that Joe works 20 hours per week, for pay, at a local fast food restaurant. Frank, on the other hand, does not currently have a job. After constantly hearing about his brother's exciting work adventures, Frank filled out a job application at the same restaurant two weeks ago. While he is eager to begin immediately, Frank has not yet received a response to his application. Is Frank included in the civilian noninstitutional population?

no

Suppose 15-year-old Joe and his 17-year-old brother Frank are full-time high school students. Suppose further that Joe works 20 hours per week, for pay, at a local fast food restaurant. Frank, on the other hand, does not currently have a job. After constantly hearing about his brother's exciting work adventures, Frank filled out a job application at the same restaurant two weeks ago. While he is eager to begin immediately, Frank has not yet received a response to his application. Is Joe classified as employed?

not relevant

Suppose 15-year-old Joe and his 17-year-old brother Frank are full-time high school students. Suppose further that Joe works 20 hours per week, for pay, at a local fast food restaurant. Frank, on the other hand, does not currently have a job. After constantly hearing about his brother's exciting work adventures, Frank filled out a job application at the same restaurant two weeks ago. While he is eager to begin immediately, Frank has not yet received a response to his application. Is Joe classified as not in the labor force?

no

Suppose 15-year-old Joe and his 17-year-old brother Frank are full-time high school students. Suppose further that Joe works 20 hours per week, for pay, at a local fast food restaurant. Frank, on the other hand, does not currently have a job. After constantly hearing about his brother's exciting work adventures, Frank filled out a job application at the same restaurant two weeks ago. While he is eager to begin immediately, Frank has not yet received a response to his application. Is Joe classified as unemployed?

no

Suppose 15-year-old Joe and his 17-year-old brother Frank are full-time high school students. Suppose further that Joe works 20 hours per week, for pay, at a local fast food restaurant. Frank, on the other hand, does not currently have a job. After constantly hearing about his brother's exciting work adventures, Frank filled out a job application at the same restaurant two weeks ago. While he is eager to begin immediately, Frank has not yet received a response to his application. Is Joe included in the civilian noninstitutional population?

frictionally

Suppose 37-year-old Chris is a mother who has become bored with staying at home and raising her two-year-old daughter. As a result, she has placed her child in day care, is available to begin a job immediately, and has been actively seeking employment for the last seven weeks. In this situation Chris would be considered _____ unemployed.

Investment

Suppose AJ purchases a new reception desk that was produced in the U.S. for use in her privately-owned law office in Baton Rouge. Everything else held constant, this will cause the _____ component of U.S. GDP to increase

yes

Suppose Becky is a 16-year-old, full-time high school student who works 18 hours per week, without pay, in her family's seafood restaurant. At present she is actively seeking a paid job at a local bookstore, one which she could begin immediately. Is Becky classified as employed?

no

Suppose Becky is a 16-year-old, full-time high school student who works 18 hours per week, without pay, in her family's seafood restaurant. At present she is actively seeking a paid job at a local bookstore, one which she could begin immediately. Is Becky classified as not in the labor force?

no

Suppose Becky is a 16-year-old, full-time high school student who works 18 hours per week, without pay, in her family's seafood restaurant. At present she is actively seeking a paid job at a local bookstore, one which she could begin immediately. Is Becky classified as unemployed?

yes

Suppose Becky is a 16-year-old, full-time high school student who works 18 hours per week, without pay, in her family's seafood restaurant. At present she is actively seeking a paid job at a local bookstore, one which she could begin immediately. Is Becky included in the civilian noninstitutional population?

seasonally

Suppose Brian lost his job as a tennis instructor when his hotel on Long Island, New York closed for the winter. In this situation, Brian would be considered _____ unemployed

government spending

Suppose LSU purchases a new desk that was produced in the U.S. for use in the Economics Department office. Everything else held constant, this will cause the _____ component of U.S. GDP to increase.

better; worse

Suppose Lori agrees to lend her sister Holly $1000 for one year at a fixed nominal rate of interest. Suppose further that, at the time the loan is made, both Lori and Holly expect the rate of inflation to be 3 percent. If the actual inflation rate turns out to be 2 percent during the year, then Lori will be _____ off than she expected and Holly will be _____ off than she expected, everything else held constant.

investment

Suppose a privately-owned laundromat in Mexico purchases a new clothes dryer produced in the U.S. Everything else held constant, this will cause the _____ component of Mexican GDP to increase.

export

Suppose a privately-owned laundromat in Mexico purchases a new clothes dryer produced in the U.S. Everything else held constant, this will cause the _____ component of U.S. GDP to increase.

medium of exchange

Suppose an American tourist visiting Paris, France stops to read a menu posted outside a restaurant. On the menu the price of each dish is listed in euros. The tourist pauses to mentally convert the prices into U.S. dollars. After several minutes of consideration, he thinks, "No way am I going to pay $45 to eat at this place." If the man stays and eats, euros functions as

standard of value

Suppose an American tourist visiting Paris, France stops to read a menu posted outside a restaurant. On the menu the price of each dish is listed in euros. The tourist pauses to mentally convert the prices into U.S. dollars. After several minutes of consideration, he thinks, "No way am I going to pay $45 to eat at this place." In the situation above, the US dollar is performing which of the following functions of money?

unit of account

Suppose an American tourist visiting Paris, France stops to read a menu posted outside a restaurant. On the menu the price of each dish is listed in euros. The tourist pauses to mentally convert the prices into U.S. dollars. After several minutes of consideration, he thinks, "No way am I going to pay $45 to eat at this place." In the situation above, the euro is performing which of the following functions of money?

will be counted in 2016 GDP as part of investment

Suppose that a department store added domestically-produced refrigerators to its inventory in June 2016 because it expected an increase in demand for them. The store miscalculated the preferences of its customers, however, and was not able to sell the refrigerators until January 2017. The refrigerators added to the store's inventory in June 2016 How, if at all, will the fridges be calculated in GDP?

consumption

Suppose you purchase a new desk that was produced in the U.S. for use in your home in Baton Rouge. Everything else held constant, this will cause the _____ component of U.S. GDP to increase.

nominal; high

The Fisher effect is the tendency for ________ interest rates to be ________ when the inflation rate is high

stock

Wealth is a _______ variable

inflation

What is a continual increase in aggregate price?

Real = Nominal - Inflation

What is the equation relating nominal, real, and inflation rates?

y = C + I + G + X - IM

What is the equation to calculate GDP

Inflation rate

What is the percent change in aggregate price levels?

-3%

What is the real interest rate if nominal interest rate is 0% and expected inflation rate is 3%

technical recession

What is the term given to two consecutive quarters of negative REAL annual percent change?

cyclical

What kind of unemployment is the most detrimental to the performance of a dynamic market economy?

Real rate should be small as possible

When is borrowing advantageous? (in terms of the relationship between inflation, real, and nominal interest rates)

structural

Which type of unemployment is referred to as a long-term mismatch between employer and individual?

frictional

Which type of unemployment is the least detrimental to the performance of a dynamic market economy?

frictional and structural

Which types of unemployment will always be present?

no; it is an intermediate good

Will a bag of flour purchased by a bakery from a wholesale distributor be counted in GDP?

unemployment rate

percentage of people in the economy who are both able to and looking for work but who cannot find jobs. (unemployed/civilian labor force)

countercyclical

rate that moves in the opposite direction as business cycle; increases when in recession, decreases when in expansion

business cycle

short-run, temporary upward or downward movement of economic activity, or real GDP, that occurs around the growth trend.

macroeconomics

study of problems that affect the economy as a whole (lack of growth, recessions, unemployment, and inflation) and what to do about them

Civilian Labor Force

sum of employed and unemployed persons.

target rate of unemployment

the lowest sustainable rate of unemployment that policy makers believe is achievable given existing demographics and the economy's institutional structure.

frictional unemployment

unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another one example: college student looking for job after graduation

Structural Unemployment

unemployment caused by the institutional structure of an economy or by economic restructuring making some skills obsolete or, a job available but lack of skills/geographical match

Cyclical Unemployment

unemployment resulting from fluctuations in economic activity; or, no job opening because of the economy

seasonal unemployment

unemployment that occurs due to lack of job because of cultural/atmospheric factors

Employed Population

-did any work as paid employees during reference week -worked in their own business, profession, on own farm -worked without pay at least 15 hours in family business or farm -temporarily absent from jobs due to illness, bad weather, vacation, labor-management disputes, or personal reasons

Unemployed Population

-no employment during reference week -available for work during reference week -made specific efforts to find employment during 4 week period ending with reference week -laid off from job and expecting recall don't need to be looking for work to be considered

procyclical

A rate that moves in the same direction as business cycle; increases when there is expansion; decreases when there is a recession

4.4

According to the BLS Household Survey, the unemployment rate in the United States was _____ percent in August 2017

4.1

According to the BLS Household Survey, the unemployment rate in the United States was _____ percent in October 2017

4.2

According to the BLS Household Survey, the unemployment rate in the United States was _____ percent in September 2017

true

(T/F) If the United States economy is operating at full employment, then it is experiencing a rate of unemployment greater than zero percent.

noninstitutional population

-16 and older -not in jail -not in long term hospital care -not in military

good store of value

During periods of rapidly increasing prices, money fails to serve as

disappear when economy comes out of recession

If unemployment in the US is purely cyclical, how will it be solved?

increased; 7

If nominal income has increased by 4 percent and the aggregate price level has decreased by 3 percent, then real income has _____ by _____ percent, everything else held constant.

Recession

If the United States is experiencing a steady increase in unemployment, the country is in a ____________

smaller; greater

In August 2017 the month-to-month percent change in the core CPI was +0.2. In September 2017 the month-to-month percent change in the core CPI was +0.1. Thus the inflation rate in September was _____ than it was in August and the aggregate price level in September was _____ than it was in August.

unit of account

In ancient Mesopotamia the accounts of the city temples were expressed in silver, although payment seems largely to have been made in barley and oil. Used in this way, silver was serving which of the following functions of money?

flow

Income is a _________ variable

medium of exchange

The Kapauku people of the mountains of New Guinea used shells in a number of different economic activities, one being that payment in shells was made to buy tobacco and pork. Used in this way, shells were functioning as a

the inflation rate

The month-to-month change in the total CPI is the most publicized measure of?

short-term; economic growth rates

The term "business cycle" refers to the ______ fluctuations in __________

employed; unemployed

Underemployed workers (i.e., "persons employed part time for economic reasons") are classified as _____ in the official (U-3) unemployment rate definition and _____ in the U-6 unemployment rate definition.