question
Why Unemployment Is a Problem?
answer
results in:
-Lost incomes and production
-Lost human capital
-Lost incomes and production
-Lost human capital
question
population is divided into two groups
answer
1.working-age population
2. too young to work
2. too young to work
question
working-age population
answer
divided into two groups:
1.people in labor force,
2. people not in labor force
1.people in labor force,
2. people not in labor force
question
labor force
answer
the sum of employed and unemployed workers.
question
unemployed
answer
to be counted as _____: person must be one of these-->
1. without work (but made efforts in prev. 4 weeks)
2. waiting to be called back (laid off)
3. waiting to start a new job within 30 days
1. without work (but made efforts in prev. 4 weeks)
2. waiting to be called back (laid off)
3. waiting to start a new job within 30 days
question
Three Labor Market Indicators
answer
1.The unemployment rate
2. The employment-to-population ratio
3. The labor force participation rate
2. The employment-to-population ratio
3. The labor force participation rate
question
The Unemployment Rate
answer
is the percentage of the labor force that is unemployed
question
labor force
answer
= employed + unemployed
question
increases, peak
answer
The unemployment rate ______ in a recession and reaches its ____ value after the recession ends.
question
The Employment-to-Population Ratio
answer
is the percentage of the working-age population who have jobs.
= (employment/working-age pop) x 100
= (employment/working-age pop) x 100
question
labor force participation rate
answer
the percentage of the working-age population who are members of the labor force.
question
marginally attached workers
answer
person who currently is neither working nor looking for work but has indicated that he or she wants and is available for a job and has looked for work sometime in the recent past.
-discouraged worker
-discouraged worker
question
discouraged worker
answer
marginally attached worker who has stopped looking for a job because of repeated failure to find one.
question
economic part-time workers
answer
some part-time workers would like full-time jobs and can't find them
question
long-term
answer
All unemployment is costly, but the most costly is ___-____ unemployment that results from job loss.
question
3 classifications of unemployment
answer
-Frictional unemployment
-Structural unemployment
- Cyclical unemployment
-Structural unemployment
- Cyclical unemployment
question
Frictional Unemployment
answer
-unemployment that arises from normal labor market turnover
-is a permanent and healthy phenomenon of a growing economy.
-is a permanent and healthy phenomenon of a growing economy.
question
raise
answer
Increases in the number of people entering and reentering the labor force and increases in unemployment benefits ___ frictional unemployment.
question
structural unemployment
answer
unemployment created by changes in technology and foreign competition that change the skills needed to perform jobs or the locations of jobs
-lasts longer than frictional unemployment
-lasts longer than frictional unemployment
question
Cyclical unemployment
answer
the higher than normal unemployment at a business cycle trough and lower than normal unemployment at a business cycle peak (occurs during fluctuations in real GDP)
-being laid-off during recession and rehired during expansion
-being laid-off during recession and rehired during expansion
question
Natural Unemployment
answer
is the unemployment that arises from frictions and structural change when there is NO CYCLICAL unemployment
-is all frictional and structural unemployment
-is all frictional and structural unemployment
question
natural unemployment rate
answer
natural unemployment as a percentage of the labor force.
question
full employment
answer
The level of unemployment that occurs when the unemployment rate is at the natural rate (again, no cyclical -> all is frictional and structural)
question
Key Factors that change natural employment
answer
-The age distribution of the population
-The scale of structural change
-The real wage rate
-Unemployment benefits
-The scale of structural change
-The real wage rate
-Unemployment benefits
question
Potential GDP
answer
is the quantity of real GDP produced at full employment.
-corresponds to the capacity of the economy to produce output on a sustained basis.
-corresponds to the capacity of the economy to produce output on a sustained basis.
question
output gap
answer
real GDP- potential GDP
-over the business cycle, ______ ___ fluctuates and the unemployment rate fluctuates around the natural unemployment rate.
-over the business cycle, ______ ___ fluctuates and the unemployment rate fluctuates around the natural unemployment rate.
question
negative
answer
when the output gap is ______, the unemployment rate exceeds the natural unemployment rate
question
price level
answer
the average level of prices and the value of money
question
inflation
answer
A persistently rising price level
question
deflation
answer
A persistently falling price level, negative inflation
question
unpredictable
answer
________ inflation or deflation is a problem because it:
-Redistributes income and wealth
- Lowers real GDP and employment
- Diverts resources from production
-Redistributes income and wealth
- Lowers real GDP and employment
- Diverts resources from production
question
changes
answer
Unpredictable _____ in the inflation rate redistribute income in arbitrary ways between employers and workers and between borrowers and lenders.
question
high
answer
A ____ inflation rate is a problem because it diverts resources from productive activities to inflation forecasting
question
resources
answer
From a social perspective, this waste of _______ is a cost of inflation
question
hyperinflation
answer
At its worst, inflation becomes ________ —an inflation rate that is so rapid that workers are paid twice a day because money loses its value so quickly.
-(think germany)
-(think germany)
question
Consumer Price Index (CPI)
answer
measures the average of the prices paid by urban consumers for a "fixed" basket of consumer goods and services.
question
reference base period
answer
The CPI is defined to equal 100 for the ____ ____ ____
question
Constructing CPI
answer
involved 3 steps:
1. Selecting the CPI basket
2. Conducting a monthly price survey
3. Calculating the CPI
1. Selecting the CPI basket
2. Conducting a monthly price survey
3. Calculating the CPI
question
The CPI Basket
answer
is based on a Consumer
Expenditure Survey, which is undertaken
infrequently
-housing is the largest component, then transport/food and beverages
Expenditure Survey, which is undertaken
infrequently
-housing is the largest component, then transport/food and beverages
question
The Monthly Price Survey
answer
Every month, BLS employees check the prices of the 80,000 goods in the CPI basket in 30 metropolitan areas.
question
Calculating CPI
answer
1. Find the cost of the CPI basket at base-period prices.
2. Find the cost of the CPI basket at current-period prices.
3. Calculate the CPI for the current period.
2. Find the cost of the CPI basket at current-period prices.
3. Calculate the CPI for the current period.
question
CPI
answer
=
question
Inflation rate
answer
is the percentage change in the price level from one year to the next.
question
rapidly
answer
inflation is high when price level is rising ____
question
slowly
answer
inflation is low when price level is rising _____
question
negative
answer
inflation is _____ when price level is falling
question
The Biased CPI
answer
- New goods bias
- Quality change bias
- Commodity substitution bias
- Outlet substitution bias
- Quality change bias
- Commodity substitution bias
- Outlet substitution bias
question
new goods bias
answer
New goods that were not available in the base year appear and, if they are more expensive than the goods they replace, they put an upward bias into the CPI.
question
quality change bias
answer
Quality improvements occur every year. Part of the rise in the price is payment for improved quality and is not inflation.
-The CPI counts all the price rise as inflation.
-The CPI counts all the price rise as inflation.
question
Commodity Substitution Bias
answer
The market basket of goods used in calculating the CPI is fixed and does not take into account consumers' substitutions away from goods whose relative prices increase.
question
outlet substitution bias
answer
As the structure of retailing changes, people switch to buying from cheaper sources, but the CPI, as measured, does not take account of this outlet substitution.
question
Consequences of Bias
answer
-->Distorts private contracts.
--> Increases government outlays (close to a third of federal government outlays are linked to the CPI).
-A bias of 1 percent is small, but over a decade adds up to almost $1 trillion of additional expenditure.
--> Increases government outlays (close to a third of federal government outlays are linked to the CPI).
-A bias of 1 percent is small, but over a decade adds up to almost $1 trillion of additional expenditure.
question
GDP deflator
answer
is like the PCE deflator except it includes the prices of all goods and services that are counted in GDP.
question
real wage rate
answer
= (nominal wage rate/ GDP deflator) x 100
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
