Macroeconomics

Which of the following is an example of structural unemployment?

Telephone operators replaced by computerized systems in the 1970s.

To determine the unemployment rate, you need to calculate

The number of unemployed workers divided by the labor force.

Frictional unemployment occurs because in a world of imperfect information, it takes ________ for people to find jobs.

time

When the macroeconomy is experiencing a higher than natural rate of unemployment, it must be because

wages cannot adjust downward quickly and easily.

In the table below there are three years of a basket of retail goods. From this information calculate the price index of 1990 if the base year in 1980? (Round your answer to the nearest whole number.)

245

The small coastal town of Innsmouth in Essex County, MA has a total population of five thousand, of whom four thousand are aged sixteen and above. The nearby Miskatonic University is currently studying the town's labor force after recent allegations of unusual work patterns by the town's inhabitants. The university's labor economists find that only one thousand of the town's inhabitants are currently employed, mostly at a small gold refinery running of the leanest kind of part-time. A further 100 townspeople are classified as unemployed---not working but currently searching for new employment. Based on these finding, what is Innsmouth's current labor force participation rate and percentage out of the labor force?

27.5% and 72.5%

The country of Snowdonia has a total adult population of 10 million, and of these 210 thousand are currently out of work and actively searching for new employment. A further 2.9 million are not working because they are retired, institutionalized, or simply choose not to work (i.e. homemakers and full-time students). Finally a total of 100 thousand citizens are currently enlisted with the Snowdonian military. Assuming the Snowdonian ministry of statistics uses the same unemployment formula as the U.S. Bureau of the Census, what is Snowdonia's current unemployment rate? The question has been evaluated. Your choice is correct. 2.9%

3%

The small country of Vinlandia has a total adult population of 5 million. Of these 3.5 million are currently employed while 500 thousand are out of work and currently searching for new employment opportunities. The Ministry of Statistics estimates there are 300 thousand retirees and 150 thousand who are out of work and not actively searching for new employment opportunities. To these can be added 300 thousand homemakers, 200 thousand full-time adult students, and 50 thousand active duty military personnel. If the Vinlandia Ministry of Statistics follows the labor force criteria used by the U.S. Bureau of the Census, what is the size of Vinlandia's labor force?

4 million

Given the table above, what is the price index for 2013, with 2012 as the base year having a price index of 100 (round your answer to the nearest whole number).Items: Quantity in Basket2012 Price2013 PriceCake3$12.00$13.00Pie4$8.00$10.00Cupcake10$2.00$2.50

Correct. The price index = Cost of the basket in the current year (2013) / Cost of the basket in the base year (2012) x 100 = $104 / $88 = 118

Why are certain policy decisions (like those undertaken by the Federal Reserve) best informed by using the core inflation index as opposed to the CPI?

Fluctuations in food and energy prices can be transitory.

In the last few decades the car manufacturing sector has found it difficult to compete with foreign car imports. High labor costs is one of the main reasons economists cite for the lack of competitiveness in the car manufacturing industry. How could a modest inflation help the car manufacturing industry in the United States compete with foreign car manufacturers?

It could allow real wages to downwardly adjust more easily.

Which of the following does NOT describe inflation?

It means that the price of every good and service is rising.

Among all high-income countries, which consistently has the lowest long-run unemployment rate in the past 30 years?

Japan

In 1985 inflation in Israel reached a record 500%. How did this period of high inflation affect market adjustments towards equilibrium price and quantity?

Markets adjusted to equilibrium more erratically and slowly.

During the 1990s worker productivity growth spiked as computers and the internet were introduced to many businesses for the first time but wage increases did not match gains in productivity. How did this affect the natural unemployment rate?

Natural unemployment decreased as productivity growth outstripped wage growth.

Henry accepted a new position at a ball bearing manufacturing plant after graduation from college. With his macroeconomic education, Henry has been asked to advise the best way to measure inflation for the company to be able to accurately adjust its prices. What would Henry advise the company use?

Producer Price Index

When the economy is at full employment, what is the relationship between real GDP and real potential GDP?

Real GDP is equal to real potential GDP.

What is excluded from the official calculation of the unemployment rate?

Students who are attending school full time and not working.

The mid-1990s saw a rise in the use of mobile phones in the general population. The technology continued to improve in the early 2000s and in the mid-2000s smartphones revolutionized the way people communicated. The technology has changed very rapidly and improved the lives of consumers. With these rapid changes, what would you suspect has happened to the CPI calculation?

The CPI has overstated the cost of living because of quality improvement bias.

You have older parents who have been saving for retirement for decades. They are now getting close to retirement age and are looking at their options. One would like to leave everything in the pension fund and draw out a fixed, unchangeable amount over their retirement time. Your other parent wants to take out a chunk of retirement funds and purchase a business and use the profit from it to generate funds on which to live. You have noticed that inflation over the last few years is on a rapid rise. What would you advise your parents to do based on what you know of inflation and its redistribution of purchasing power?

You would advise them to invest their retirement funds and keep their money working for them in order to keep up with inflation.

Which of the following demographic has the highest unemployment rate according to U.S. Census Bureau data?

Young African-American men

Bill is a construction worker who was laid off because the market for new homes was adversely affected in the recession. Bill's unemployment experience is referred to as

cyclical unemployment.

If the Consumer Price Index was 120 at the end of last year and 125 at the end of this year, Americans experienced which of the following?

inflation

Until six months ago Jane worked as an agricultural engineer until her employer filed for bankruptcy. For the first four months she actively searched for new employment opportunities, yet the past couple months she has become discouraged in her job search. She is no longer actively looking for work and spends her time on hobbies such as pottery and painting. According to the U.S. Bureau of the Census criteria, Jane would now be considered ________ .

out of the labor force