unit 6 chapter 9
The employment-population ratio measures the
percentage of the working age population that is employed.
Which of the following is the correct interpretation of an unemployment rate of 4%?
4% of the labor force is out of work and looking for work. The unemployment rate measures the percentage of the labor force that is out of work. To be counted as part of the labor force, but out of work, a person must be not working and actively looking for work.
Which of the following would most likely cause a nation's labor force participation rate (LFPR) to increase?
Fewer parents choose to stay at home with their children and instead take part-time jobs At-home work, such as child-care, is not considered formal employment. Individuals who primarily work in the home are therefore not part of the labor force. When more parents take part-time jobs, they are entering the labor force, causing the LFPR to increase.
If inflation is unexpectedly high, borrowers will benefit and lenders will be harmed.
True
The labor force participation rate is calculated by
the percentage of the working-age population that is in the labor force or Labor force/Working−age population×100
The three types of unemployment are
frictional, structural, and cyclical unemploment.
Of the eight categories in the CPI market basket, which three categories make up more than 75 percent of the basket?
housing, transportation, and food
In May 2017, an article in the New York Times had the headline: "We're Getting Awfully Close to Full Employment." The article contained the following observation: "The so-called U-6 rate...fell to 8.6 percent in April from 8.9 percent [in March]." What is the U-6 unemployment rate?
A broader measure of the unemployment rate that includes discouraged workers and part-time workers who want full-time jobs.
Which groups tend to have above-average unemployment rates, and which groups tend to have below-average unemployment rates? Consider the following choices. Which one is not accurate? A. Generally, teenagers as a group have higher unemployment rates than adults. B. Black teenagers as a group have lower unemployment rates than white teenagers. C. White adults have below-average unemployment rates. D. Black adults have above-average unemployment rates.
B. Black teenagers as a group have lower unemployment rates than white teenagers.
Which groups tend to have above-average unemployment rates, and which groups tend to have below-average unemployment rates? Consider the following choices. Which one is not accurate? A. Generally, teenagers as a group have higher unemployment rates than adults. B. Black adults have above-average unemployment rates. C. Black teenagers as a group have lower unemployment rates than white teenagers. D. White adults have below-average unemployment rates.
C. Black teenagers as a group have lower unemployment rates than white teenagers.
The real interest rate equals
the nominal interest rate minus the inflation rate.
The Bank of King's Landing has made many loans to the lords of Winterfell. The Bank is considering whether they will benefit or not if the rate of inflation changed. Under which circumstance would the Bank realize an unexpected benefit?
when the actual rate of inflation is lower than the anticipated level of inflation
The unemployment rate is calculated as follows:
UE Rate = (# of Unemployed) / (Labor Force) x 100
Two important trends in the labor force participation rates of adults aged 20 and over in the United States since 1948 are the _________ labor force participation rate of adult women and the __________ labor force participation rate of adult men.
rising; falling
The current rate of unemployment in Burrland is 3%. Economists estimate that frictional unemployment is 5% and structural unemployment is 2%. Which of the following best describes the amount of cyclical unemployment in Burrland and current output in the economy?
Cyclical unemployment is −4%; output is greater than full employment output.
Many economists prefer
the establishment survey because it is determined by actual payroll records rather than unverified answers.
When the economy is at full employment, unemployment is equal to
the natural rate of unemployment.
For a given positive inflation rate,
the nominal interest rate is always higher than the real interest rate, and the real interest rate may be positive or negative.
When a firm pays a wage that is higher than the market wage in order to increase worker productivity, the wage is called
an efficiency wage.
Workers who lose their jobs because of a recession are experiencing
cyclical unemployment.
An increase in the number of job quits would suggest that it is becoming
easier to find jobs because employees who leave voluntarily are confident of finding another one.
If income rises more slowly than the rate of inflation, purchasing power will rise. True or false?
false
From December 2007 to December 2010, the BLS initially reported that employment
losses were significantly less than they actually were.
The type of unemployment most likely to result in hardship for the people who are unemployed is
structural because this type of unemployment requires retraining to acquire new job skills.
In April 2017, which of the following demographic groups had a higher rate of unemployment than the unemployment rate for the total population? A. asians B. high school dropouts C. college graduates D. whites
B. high school dropouts
An article in the Wall Street Journal noted that over a four-month period in late 2014, employment in the state of Georgia "rose 1% even as the state's jobless rate climbed 1.2 percentage points." The state's unemployment rate could have increased at the same time that employment in the state was increasing because
the number of discouraged workers and other people not previously counted as unemployed entered the labor force.
The BLS collects price statistics from traditional full-price retail stores, which do not reflect the prices some consumers pay by shopping at discount stores or on the Internet. This is a description of which bias?
the outlet bias
During the recovery from the 2007-2009 recession, the employment-population ratio did not increase as much as it might have been expected to because
the recovery was sluggish and employment did not expand as rapidly.
When the economy was expanding in early 2007, fewer than _______ percent of the unemployed had been jobless for more than 6 months.
20
Since the late 1940s, the overall labor force participation rate
has risen because the decline in the labor force participation rate of adult men has been more than offset by the increase in the labor force participation rate of adult women.
Increases in the minimum wage will
increase unemployment among teenagers.
Even if they don't find a job right away, people entering the job market after graduating from high school or college will
be counted as part of the labor force by the BLS if they are actively looking for work.
Assume the government of Hamsterville increases taxation and reduces government spending. These actions cause a fall in total spending in the economy. Which of the following is the best description of the type of unemployment the fall in output will have? Choose 1 answer:
cyclical unemployment
To avoid the cost of the purchasing power of paper money decreasing with inflation, workers and firms will try to hold as much paper money as possible. true or false?
false
When the economy is at full employment, which types of unemployment remain?
frictional and structural
The short-term unemployment that arises from the process of matching workers with jobs is called
frictional unemployment
The unemployment rate that includes discouraged workers and people working part-time who would prefer full-time jobs
is higher than the official unemployment rate, and the difference between the two grows larger in recessions.
During an economic expansion, we would normally expect the employment-population ratio to increase as the unemployment rate falls because
more people are likely to be employed.
Which one of the following accurately describes the relationship between frictional unemployment and job search?
People are said to be frictionally unemployed when they are between jobs and searching for new jobs.
Relative to the household survey, which of the following is a strength of the establishment survey?
The establishment survey is determined by actual payrolls, rather than by the unverified answers of the household survey.
Which one of the following depicts an accurate description of the household survey and the establishment survey?
The household survey interviews households and collects data that is used to measure the unemployment rate whereas the establishment survey interviews businesses and measures total employment in the economy.
If unemployed workers decide to stop looking for a job and instead enroll in further education, how will the number of employed workers and the unemployment rate change?
The number of employed workers does not change; the unemployment rate decreases Individuals going back to school do not affect the number of employed workers. On the other hand, when unemployed workers stop looking for jobs they leave the labor force. When both the number of people unemployed decrease and the labor force decreases, the unemployment rate decreases.
Why do economists and policymakers track changes in the U-6 measure of the unemployment rate?
The official U-3 measure of the unemployment rate may understate the true extent of joblessness in the economy.
Melisandre asks you to loan her \$600$600dollar sign, 600 until next year. She offers to pay you 10\%10%10, percent annual interest. You are very suspicious of her motives and believe she is trying to gain at your expense. What does Melisandre expect about the inflation rate if you know she is trying to benefit at your expense?
The rate of inflation will be more than 10\%10%10, percent If inflation is more than 10\%10%10, percent, the value of what she pays you back will be less than the value of what you are lending her. When there is inflation, a lender must get more than the rate of inflation to earn a positive real return.
How would it affect the unemployment rate if the Bureau of Labor Statistics counted as unemployed both (1) discouraged workers and (2) people who work part-time but would prefer to work full-time?
The unemployment rate would increase.
What does it mean when economists say the economy is at full employment?
There is no cyclical unemployment; the only remaining unemployment is structural and frictional.
The producer price index (PPI) tracks the prices firms receive for goods and services at all stages of production. true or false?
True
Which of the following best explains why the consumer price index (CPI) may not accurately measure changes in the cost of living?
When prices of some goods go up, consumers buy less of those and more of goods that are cheaper A problem with the CPI as a measure of the cost of living is that there might be "substitution bias." The CPI assumes that consumers always buy the same quantity of every good. But, in reality, if the price of one good increases, people might buy more of a substitute for that instead. This can lead to the CPI overstating an increase in the cost of living.
The BLS defines a job quit as a "voluntary separation initiated by an employee." The BLS estimated that there were 3.1 million job quits in March 2017. Unemployment caused by an increase in job quits would be classified as
frictional unemployment.
Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called
structural unemployment.
Which of the following is not one of the conditions someone needs to meet to be counted as unemployed? A. They had actively looked for work at some time during the previous four weeks. B. They had worked only one hour per week during the previous four weeks. C. They must not have worked in the week previous to the survey week. D. They were available for work in the week previous to the survey week.
B. They had worked only one hour per week during the previous four weeks.
Computation of the CPI assumes that households buy the same market basket of products each month. For this reason, which one of the following factors is not relevant in calculating the CPI? A. the prices of the products households purchase in the current year B. the prices of the products households purchase in the base year C. the quantities of the products households purchase in the current year D. the quantities of the products households purchase in the base yea
C. the quantities of the products households purchase in the current year
If the U.S. economy was close to full employment in May 2017, why was the U-6 measure of the unemployment rate still as high as 8.6?
Even at full employment, there were many discouraged workers and part-time workers who wanted full-time jobs.
Most economists agree that the above-market wage paid in unionized industries significantly increases the unemployment rate in the United States. True or false?
False, unionization does not significantly increase unemployment rate because so little industries are unionized w/ wages above the market level
Which of the following agents would benefit from unanticipated inflation?
Grey Worm, who has $3,000 in student loan debt that has a fixed interest rate of 3.5% The purchasing power of what Grey Worm pays back is lower than the purchasing power of what he borrowed. If the interest rate does not adjust to take that into account, then he is better off under a higher inflation rate.
Which of the following would be most likely to cause a decrease in the natural rate of unemployment?
More people opt for an early retirement If people retire earlier, this would likely decrease frictional unemployment. As more jobs open up as retirees leave them, it will be easier for the frictionally unemployed to find jobs. This means that the natural rate of unemployment would decrease.
The president of a manufacturing firm that makes precision tools in California's Silicon Valley was quoted in an article in the Wall Street Journal as saying that "production workers...are scarce," and that "many applicants lack even the most rudimentary skills." He added that: "I would say in this valley, people looking for jobs are unemployed for a reason." Are these applicants likely to be cyclically, frictionally, or structurally unemployed, and what would be the reason that most of them are unemployed? Briefly explain.
Structurally unemployed, because these applicants lack the skills required for the available jobs.
Burgin works part-time serving bubble tea at a Karaoke club while he tries to find a full-time job as a lumberjack. Which of the following best describes Burgin's employment situation? Choose 1 answer:
underemployed Someone is underemployed if they are working part-time when they want full-time work or have jobs they are overqualified for. Not counting underemployed workers means that the official rate of unemployment makes the employment situation seem better than it is.
When there are part−time workers , the official BLS measure of the unemployment rate _______
understates the true degree of unemployment.
In his 2016 State of the Union address, President Barack Obama observed that in the previous 70 months, the U.S. economy had created "more than 14 million new jobs." Is it likely that the U.S. economy created only 14 million jobs during this time period?
No, the economy could have created more jobs, but some were also lost during that period.
Ygritte loaned Mance $900. He agreed to repay her in full, plus 6%, percent interest, after one year. When he pays off his loan, Mance discovers he is better off than he had expected to be. Which of the following best describes what must have happened to the rate of inflation?
Inflation was higher than he expected If the rate of inflation is higher than he expected it to be, then Mance is effectively paying Ygritte back less than he thought he would be paying her.
Currently, the Bureau of Labor Statistics does not include homemakers in its employment and labor force totals. What would happen to the unemployment rate and the labor force participation rate if homemakers were included in these numbers?
The unemployment rate would decrease and the labor force participation rate would increase.
If the CPI was 207 in 2009 and 225 in 2013, what wage would someone who earned a $50,000 income in 2009 have to earn in 2013 in order to keep her purchasing power constant?
value in 2013 dollars = value in 2009 dollars(CPI in 2013/CPI in 2009) --> = 50,000(225/207) = 54,347.83 final answer --> $54,348
In 2017, the Bureau of Labor Statistics (BLS) analyzed and revised its employment data for the period December 2007-December 2010. According to that revision, the recession of 2007-2009
was more severe than economists and policymakers realized at the time.
The extent of job creation and job destruction is
what we would expect in a vibrant market system.
If the inflation rate is 6 percent and the nominal interest rate is 4 percent, then the real interest rate is
-2 percent, which is the nominal interest rate minus the inflation rate.
The unemployment rate in the United States is usually ________ than the unemployment rates in most other high-income countries, partly because the United States has _________ requirements for the unemployed to receive government payments.
lower; more stringent
Briefly explain whether you agree or disagree with the following statement: "I don't believe the government price statistics. The for CPI 2016 was 212, but I know that the inflation rate couldn't have been as high as 112 percent in 2016."
Disagree. The inflation rate is the percentage increase in the price level from the previous year, not the base year.
The unemployment rate declined from 4.5 percent in March 2017 to 4.4 percent in April. The labor force participation rate also declined from March to April, from 63.0 percent to 62.9 percent. Holding constant the number of people employed in April 2017, if the labor force participation rate had increased instead of decreased, the unemployment rate for April 2017 would be
greater than 4.4 percent because adding the same number to both the numerator and the denominator of a fraction that is less than one increases the value of the fraction.
In discussing the labor market during the recovery from the 2007-2009 recession, Federal Reserve Chair Janet Yellen noted that "the employment-to-population ratio has increased far less over the past several years than the unemployment rate alone would indicate, based on past experience." During an economic expansion, we would normally expect the employment-population ratio to increase as the unemployment rate falls because
more people are likely to be employed.
Which of the following is the best definition of a real variable?
nominal values deflated by the price level Real variables are nominal variables deflated by the price level. For example, to find real GDP, you divide nominal GDP by the price level. The purpose of a real variable is to get a more accurate understanding of a variable by removing the effect of changes in the price level.
An article in the Wall Street Journal contained the following observation: "Every month, millions of workers leave the job market because of retirement, to care for children or aging parents, to pursue more education, or out of discouragement. Millions of others jump in after graduating." The millions of workers leaving the job market for the reasons given are
not counted as unemployed in the BLS data because they are no longer actively looking for work.
All of the following are problems in measuring the unemployment rate except that A. people on active military service are included as unemployed. B. lack of verification of people's responses in the household survey. C. part-time workers are included as employed. D. discouraged workers are not included in the labor force.
people on active military service are included as unemployed.
Changes in the CPI overstate the true inflation rate due to four "biases." If apple prices rise rapidly during the month while orange prices fall, consumers will reduce their apple purchases and increase their orange purchases. Which of the four biases is concerned with this consumer behavior?
the substitution bias
The natural rate of unemployment is
the sum of structural unemployment and frictional unemployment.
The "normal" underlying level of unemployment in the economy is
the full-employment rate of unemployment. the natural rate of unemployment. the sum of structural unemployment and frictional unemployment
An article in the Wall Street Journal asks the question, "How can inflation be low when everything is so expensive?" The article also notes that "the CPI shows that prices are the highest they've ever been." Is there a contradiction between a low inflation rate as measured by the CPI and the observations that prices are "the highest they've ever been" and everything is "so expensive"?
No, because the CPI and inflation measure only changes in the price level, not the absolute level of prices. [We can't use the CPI to tell us in an absolute sense how high the price level is—only how much the price level has changed over time. The CPI is a measure of the average change over time in the prices a typical family pays for a representative basket of goods and services. The value of this index number is set to equal 100 for whatever year is chosen to be the base year, and will go up or down as the cost of that basket (or the cost of living) rises or falls. The percentage change in the CPI provides one measure of the inflation rate. As long as the inflation rate is positive, the CPI will be higher than it was the year before, and each year its value will be "the highest it's ever been."]