Into to Econ-Macro (5-7)

What does unemployment result in?

- Lost Incomes and Productions - Lost Human Capital

What people are excluded from Unemployment?

1. Marginally Attached Workers: Persons who is neither working nor looking for work, but has indicated that he/she wants and is available for a job, and have looked for work sometime in the past. 2. Part time workers who have full time jobs.

What are the conditions for one to be counted as unemployed?

1. Without work but has made efforts to find a job within the previous four weeks. 2. Waiting to be called back for a job from which he or she has been laid off. 3. Waiting to start a job within 30 days.

A recession causes a decrease in the demand for housing, resulting in substantial layoffs in the construction industry. The people laid off are considered. A. frictionally unemployment. B. structurally unemployment. C. cyclically unemployment. D. seasonally unemployment.

C. cyclically unemployment.

________ is the knowledge and skill that people have obtained from education and on-the-job training. A. Human capital B. Labor productivity C. Capital D. Technology

A. Human capital

Potential GDP per labor hour can increase due to A. increases in labor productivity. B. increases in population. C. decreases in the quantity of capital. D. increases in the quantity of money.

A. increases in labor productivity.

The biases in the CPI include the... A. new goods, quality change, and substitution biases. B. substitution, new goods, and old goods biases. C. old goods, new goods, and quality change biases. D. old goods, unemployment, and inflation biases.

A. new goods, quality change, and substitution biases.

The bias in the CPI typically... A. overstates inflation. B. about half the time overstates and about half the time understates the inflation rate. C. cannot be measured or estimated. D. understates inflation.

A. overstates inflation.

The aggregate production function shows how ________ varies with ________. A. real GDP; labor B. labor; leisure time C. leisure time; labor D. labor; capital

A. real GDP; labor

People base their labor supply on the ________ because they care about ________. A. real wage; what their earnings will buy B. real wage; the equality of money wages and the price level C. money wage; a surplus of labor D. money wage; the amount of labor firms demand

A. real wage; what their earnings will buy

At the end of last year, the CPI equaled 120. At the end of this year, the CPI equals 132. What is the inflation rate over this year? A. 6 percent B. 10 percent C. 12 percent D. None of these answers are correct because more information is needed to calculate the inflation rate.

B. 10 percent

Over the last 100 years, the average U.S. growth rate in real GDP per person was about. A. 12.5 percent per year. B. 2 percent per year. C. 6 percent per year. D. 1 percent per year.

B. 2 percent per year.

All people in the working-age population can be divided into A. labor force participants. B. employed, unemployed, or not in the labor force. C. potential employees. D. either over-employed or under-employed.

B. employed, unemployed, or not in the labor force.

Technological change... A. has no effect on employment. B. increases potential GDP. C. decreases labor productivity. D. lowers the real wage rate.

B. increases potential GDP.

Ongoing economic growth in real GDP per person requires all of the following EXCEPT ________. A. the discovery of new technologies B. population growth C. investment in human capital D. saving and investment in new capital

B. population growth

An economy is at full employment when ________. A. the unemployment rate is zero B. the unemployment rate equals the natural unemployment rate C. there is no structural unemployment D. there is no frictional unemployment

B. the unemployment rate equals the natural unemployment rate

Based on the following data for the country of Tiny Town, the unemployment rate equals... Population = 100 Labor force = 80 Number of employed persons = 70 Number of discouraged workers = 5 A. 15/80 × 100. B. 10/100 × 100. C. 10/80 × 100. D. 5/70 × 100.

C. 10/80 × 100.

Based on the following data for the country of Tiny Town, the employment-to-population ratio equals ________ multiplied by 100. Population = 200 Working age population = 100 Labor Force = 90 Number of employed persons = 75 A. 90/200. B. 75/200 C. 90/100. D. 75/100.

D. 75/100.

Real GDP grows when: I. the quantities of the factors of production grow. II. persistent advances in technology make factors of production increasingly productive. III. human capital grows A. only I B. both I and III C. only II D. I, II, and III

D. I, II, and III

Which of the following statements is CORRECT? A. When the real wage increases, the labor supply curve shifts rightward. B. When the real wage increases, the labor supply curve shifts leftward. C. When the real wage decreases, the labor supply curve shifts leftward. D. None of these statements are correct.

D. None of these statements are correct.

A recent accounting graduate from a major business school is searching for a place to begin his career as an accountant. This individual is best considered as... A. seasonally unemployed. B. cyclically unemployed. C. structurally unemployed. D. frictionally unemployed.

D. frictionally unemployed.

Cyclical Unemployment

Higher than the normal unemployment at a business cycle trough and lower than normal unemployment at a business cycle peak. When the economy is in a recession and workers get laid off.

Consumer Price Index

Measure of the average of the prices paid by consumers for a fixed basket of consumer goods and services.

Unemployment Rate

The percentage of the labor force that is unemployed - Indicates how many people are looking for jobs but cannot find them.

Labor Force Participation Rate

The percentage of the working-age population in the labor force

Employment to Population Ratio

The percentage of the working-age population that is employed

Labor Force

The sum of employed and unemployed workers in the economy

Working Age Population

The total number of people aged 16 years and over who are not in jail, hospital, or some other form of institutional care or in the U.S. Armed Forces.

Full Employment

Unemployment Rate = Natural Unemployment Rate

Structural Unemployment

Unemployment that arises when changes in technology or international competition changes the skills needed to perform jobs or change the location of jobs.

Frictional Unemployment

Unemployment that arrises from normal labor turnover. Ex. People entering and leaving the labor force and ongoing creation and destruction of jobs.

Labor Force Participation Rate Formula

labor force/working age population x 100

Unemployment Rate Formula

number of unemployed/labor force x 100

Real GDP Per Person

real GDP/population

Potential GDP

the quantity of real GDP produced at full employment.

Inflation Rate Formula

(Current year CPI ) - (Earlier Year CPI) / (Earlier Year CPI) x100

Employment to Population Ratio Formula

(Number of People Employed) / (Working-Age Population) x 100

Consumer Price Index Formula

(Price of basket of goods and services in current year/price of basket in base year) x 100

What shifts the labor demand curve?

- Education and Training - Technology - Number of Companies - Government Regulations

What are the bias' of CPI?

- New Goods - Quality Change - Commodity Substitution - Outlet Substitution

What shifts the labor supply curve?

- Number of Workers - Required Education - Government Policies

What does unexpected inflation and deflation result in?

- Redistributes income and wealth - Lowers real GDP and Employment - Diverts resources from production

What is rate of Natural Unemployment influenced by?

- age of population - scale of structural change - real wage rate - Unemployment benefits

If the CPI is 120, this means that... A. prices are 120 percent higher than in the reference base period. B. prices are 0.12 times higher than in the reference base period. C. prices are 20 percent higher than in the reference base period. D. the inflation rate must be positive.

C. prices are 20 percent higher than in the reference base period.

Which theory of economic growth concludes that growth can continue indefinitely? A. the classical theory B. the neoclassical theory C. the new theory D. all of the theories

C. the new theory

Natural Unemployment

Frictional and Structural unemployment.