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
