Macro Economics Chapter 5 Quiz Review

In 2012, consumers in Dexter consumed only books and pens. The prices and quantities for 2012 and 2013 are listed in the table above. The reference base period for Dexter's CPI is 2012. What is the inflation rate in 2013? (Refer to chart Quiz 5 #4) Hint: inflation rate=CPI current year - CPI last year/ CPI last year x 100

69 %

In an economy, 23 million people are employed and 2 million are unemployed, but 5 million part-time workers would prefer full-time work. What is the unemployment rate?

8 percent

Discouraged workers

people who failed in previous attempt to find jobs and get discouraged (leads to a decrease in the labor force participation rate)

The labor force is defined as

workers with jobs and unemployed workers.

The CPI bias include

1) quality change 2) new product 3) commodity substitution 4) outlet substitution

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 Hint: Unemployment rate= # of unemployed/labor force x 100

10/80 × 100.

CPI reference base year is ALWAYS

100

The information in the table above gives the 2012 reference base period CPI basket and prices used to construct the CPI for a small nation. It also has the 2013 prices. What is the value of the CPI for the reference base period, 2012? (Refer to chart Quiz 5 #1) Hint: CPI=cost of basket in current year/ cost of basket in base year x 100

100

Suppose the price level this year is 150 and the price level last year was 125. The inflation rate between last year and this year was

20 percent.

In the table above, the number of marginally attached workers is ________. (Refer to chart Quiz #10)

4 million

How do you calculate inflation rate?

CPI in Current year-CPI in last year/ CPI in last year x 100

When price level persistently decreases

Deflation

Which of the following CORRECTLY describes "frictional unemployment"?

Frictional unemployment is a normal occurrence in a growing economy.

When Real GDP is at Potential

Full employment is achieved

When price level persistently rises

Inflation

Marginally attached workers

People who want to work but have stopped looking for jobs

Which of the following people would be counted as is employed in the Current Population Survey?

Rich, who is working 20 hours a week but wants a full-time job

Full employment exists when

There is no cyclical the economy is at the natural employment rate there is only frictional and structural unemployment ALL OF THE ABOVE ANSWERS ARE CORRECT

If the economy enters an expansion

cyclical unemployment decreases.

Natural unemployment

frictional + structural

When the economy is operating at full employment, the natural unemployment rate consists of only

frictional and structural unemployment.

A person quits her job in order to spend time looking for a better-paying job. This type of unemployment is an example of

frictional unemployment

During an economic expansion, real GDP ________ and unemployment ________.

increases; decreases

How do you calculate the labor force participation rate?

labor force/working age population x 100

Consumer Price Index (CPI)

measures average prices of a FIXED basket of commodities purchased by households

Frictional unemployment

normal labor turnover, for the time it takes to find the right job needed.

Price indexes can overstate inflation because they

omit some quality improvements

Full employment occurs

only if the unemployment rate is equal to the natural unemployment rate.

Economic part time workers

someone who wants to work full time but end up in a part time job

When the economy switches production toward services and away from manufacturing and workers in the manufacturing industry are permanently laid off

structural unemployment increases.

Cyclical unemployment is the result of

the business cycle.

Full employment

the level of employment reached when there is no cyclical unemployment

When cyclical unemployment is zero

the unemployment rate equals the natural unemployment rate.

Structural unemployment

type of unemployment that occurs when workers' skills do not match those needed for the jobs available

How do you calculate the unemployment rate?

unemployed/labor force x 100

Cyclical unemployment

unemployment caused by a business cycle recession

When real GDP is above potential output

unemployment is below its natural rate

When real GDP is below potential output

unemployment rises above its natural rate