Economics Midterm 2
Which item has the largest weight in the CPI basket?
housing
People who are working up to 34 hours per week but would like to work more are considered
involuntary part-time workers.
The CPI overstates inflation because the average consumer buys
less of those goods whose relative price has risen
In the United States, a reason for the increase of the labor force participation rate for women is that
more women pursued a college education and received higher wages upon graduation
When the economy is at full employment, the
natural unemployment rate equals the unemployment rate
If the CPI decreases from one year to the next, then the inflation rate is
negative.
Which of the following is a bias in the CPI?
new goods bias and commodity substitution bias
To be considered unemployed, a worker must have had
no employment during the week before the survey and be actively looking for a job.
Discouraged workers who are over 16 years old are
not counted as unemployed and part of the working-age population
The inflation rate measures the
percentage change in the CPI from one year to the next year.
Suppose the CPI for this year is 133.7. This number means that
prices rose 33.7 percent over the base year.
To find the cost of the CPI market basket in the current period we have to multiply the
quantities in the CPI market basket by the current period prices.
During a recession the unemployment rate generally ________ and during an expansion the unemployment rate generally ________.
rises; falls
As technology advancements have led to more white collar jobs
the labor force participation rate for women has increased over the last 50 years
Frictional unemployment is the result of
the normal process of jobs being created and destroyed
In 2020, real GDP in the United States was below potential GDP. This fact definitely means that
the unemployment rate was above the natural unemployment rate
A worker is considered part time if the worker
usually works less than 35 hours per week
One way to be classified as employed is by
working 1 hour per week at a paid job and working 15 or more hours as an unpaid worker in family business
If 160 million people are employed, 15 million people are unemployed, and the population is 280 million people, the unemployment rate is
8.6 percent.
Core inflation
excludes prices of food and energy.
The labor force participation rate is equal to
(labor force ÷ working-age population) × 100.
The value of the CPI for the reference base period is always
100
Suppose the working-age population is 500 million, the labor force is 200 million, and the unemployment rate is 15 percent. The number of unemployed people is
30 million
At full employment there is no
cyclical unemployment
Janae was fired from her job with Microsoft in the 2008-09 recession because Microsoft's sales dipped. Janae's unemployment would be best classified as
cyclical unemployment.
Which type of unemployment is the consequence of downturns in the business cycle?
cyclical
To find the cost of the CPI market basket in the base period prices we have to multiply the
To find the cost of the CPI market basket in the base period prices we have to multiply the
An example of the quality change bias, and not a new goods bias, in the calculation of the CPI is a price increase in
a 2020 smartphone versus a 2013 smartphone
Suppose that Mel (who is 27) is not working, but looked for a job as recently as 2 months ago. Mel would like a job and he is available for work. He is considered
a marginally attached worker.
A marginally attached worker is
a worker who does not have a job and is available and wants one but has not made any efforts to find a job within the previous four weeks.
The working-age population consists of all the people in the population
aged 16 and over who are not in jail, hospital, or an institution or in the U.S. Armed Forces.
Suppose higher prices lead consumers to switch from shopping at Abercrombie & Fitch to shopping at Walmart. If the CPI does not reflect this change, it is referred to as
an outlet substitution bias.
The CPI is a measure of the
average prices paid by consumers for a fixed basket of goods and services.
The CPI stands for
consumer price index
Cyclical unemployment is
created by a recession.
A weakness that could be noted about the unemployment rate is that it
does not account for the underutilization of workers.
The working-age population includes
employed and unemployed people over the age of 16.
Jane is a 25 year old, full-time student. She works part time in her school library and is paid $10 an hour. She is considered to be
employed.
Potential GDP is the level of output produced when the unemployment rate is
equal to the natural unemployment rate.
Unemployment benefits in western Europe are more generous than in the United States. As a result, ________ in the United States
frictional unemployment is lower
Unemployment benefits in western Europe are more generous than in the United States. As a result, ________ in the United States.
frictional unemployment is lower
Jordan recently quit her job as a marketing consultant in Washington, D.C. and is looking for a better-paying job with an advertising agency in New York. Jordan is considered to be
frictionally unemployed
Beth has just quit her job, moved to a new city, and is looking for a new job. Beth is
frictionally unemployed.
The unemployment rate measures the percentage of
people in the labor force who can't find a job.
During 2009, General Motors announced that it would close its Saturn facilities in the United States because of the foreign competition it faced. This corporate move
increased structural unemployment
During a recession, cyclical unemployment ________ and real GDP ________.
increases; decreases
Phillip is a 22-year old who has no job and is available for work, but has not actively looked for a job in the last month. The Current Population Survey identifies Phillip as ________, ________ the labor force, and ________ the working-age population.
not unemployed; not part of; part of
The labor force is the
number of employed people plus the number of unemployed people.
When the unemployment rate equals the natural unemployment rate, most likely the economy is producing
on the production possibilities frontier
An employee who is fired from his or her job because he or she lacks the skills required to accomplish the task, is part of ________ unemployment.
structural
Which type of unemployment arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs?
structural
Juan recently lost his job as a travel agent, which he has had for 20 years, because the demand for his services has fallen over time as more and more people book their vacations online. Unfortunately, Juan has not been able to find a new job because he lacks the skills needed to get hired in other industries where job growth is occurring. Juan is considered to be
structurally unemployed