Macroeconomics 7 – Flashcards
Unlock all answers in this set
Unlock answersquestion
The result of this is that the economy operates inside its production possibilities curve.
answer
unemployment
question
This includes people older than 16, both unemployed and employed
answer
labor force
question
What is the labor force?
answer
The total number of employed and unemployed people.
question
Unemployment is the total number of...
answer
adults who are looking for work but have not found a job
question
What are discouraged workers?
answer
Individuals who have stopped looking for work because they are convinced that they will not find a job are considered
question
How is the unemployment rate calculated?
answer
unemployed divided by the number of people in the civilian labor force
question
Official unemployment rates may underestimate the true rate of unemployment because the official rate...
answer
fails to include discouraged workers
question
stock variable
answer
quantity measured at a give point in time (ex. amount in bank account)
question
flow
answer
quantity measured per unit of time (ex. income per week)
question
What is the largest category of the unemployed?
answer
job losers
question
What is a cost of unemployment?
answer
output lost due to the fact that the economy is not running at full employment
question
Is unemployment stock or flow concept?
answer
stock
question
frictional unemployment
answer
caused due to the fact that it takes time to search/apply for jobs
question
structural unemployment
answer
jobs not needed in a certain skill area (ex. factory workers replaced by machines)
question
cyclical unemployment
answer
results from business recessions
question
With regard to employment status, the adult population is divided into what three groups?
answer
the employed, the unemployed, and those not in the labor force.
question
What are the four criteria used by the Bureau of Labor Statistics to determine whether an individual is unemployed or not?
answer
job leavers, job losers, new entrants, reentrants
question
seasonally unemployed
answer
ex. construction workers, tourism industries
question
full employment
answer
The level of unemployment that corresponds to the normal friction in the labor market
question
The natural rate of unemployment does NOT include which type of unemployment?
answer
cyclical unemployment
question
full employment means that...
answer
taking seasonal fluctuations into account, only frictional and structural unemployment exist
question
deflation
answer
A sustained decrease in the average of all prices of goods and services in the economy
question
PPI
answer
producer price index:The statistical measure of a weighted average of prices of goods and services that firms produce and sell is known as
question
inflation
answer
the average of all prices are on a sustained rise over a period of time
question
How are the rate of inflation and the purchasing power of money related?
answer
inversely
question
purchasing power
answer
value of your money in terms of buying goods/services
question
nominal value of a good
answer
price of a good in today's dollars
question
price index formula
answer
(cost of market basket today/cost of market basket in base year) × 100.
question
CPI
answer
consumer price index:the level of prices with respect to goods and services purchased by a typical consumer in urban areas
question
What does a price index show?
answer
the cost of today?s goods expressed in terms of the cost of goods in a base year
question
The broadest indication of economy-wide inflation is captured by the...
answer
Gross Domestic Product (GDP) deflator
question
Which measure gives the earliest waning of increasing inflation?
answer
The Producer Price Index
question
The price index that measures the changes in prices of ALL goods and services produced by the economy is the
answer
GDP deflator
question
PCE
answer
Personal Consumption Expenditure Index: measure of average prices that uses annually updated weights based on surveys of consumer spending
question
What is the relationship between the PPI and the CPI?
answer
the PPI usually increases before the CPI
question
real rate of interest
answer
= nominal rate of interest - anticipated rate of inflation
question
GDP deflator
answer
price index measuring the changes in prices of all new goods and services produced in the economy
question
For the CPI. the value of the index in the base year always equals...
answer
100
question
he index that is not based on a fixed market basket of goods and services is the
answer
the GDP Price Deflator
question
The price index for any designated base year must always equal...
answer
100
question
The term ?market basket? means a
answer
collection of goods that is used by a typical family
question
Unanticipated positive inflation will create ___ for creditors
answer
losses
question
Unanticipated positive inflation will create ___ for debtors
answer
gains
question
With respect to the interest rate, the inflationary premium
answer
covers anticipated depreciation in purchasing power
question
What is a COLA?
answer
an automatic increase in wages that takes into account increases in the price level
question
In sequential order, the four phases of the business cycle are
answer
peak, contraction, trough, expansion
question
peak phase of the business cycle represents
answer
a temporary maximum output level of Gross Domestic Product (GDP)
question
expansions
answer
When economy-wide business activities are increasing
question
When economy-wide business fluctuations are negative, they are referred to as
answer
contractions/recessions
question
contractions
answer
a downward movement toward a trough in economic activity
