AGEC 1010 Chapter 8 – Flashcards
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The threat of future inflation
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makes people more reluctant to lend money for long periods
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If there are 100 million people in the total population, a labor force of 50 million, and 47 million employed workers, the unemployment rate is
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6%
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The official unemployment rate ignores
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Discouraged workers who have given up looking for a job
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In general, expansions are characterized by
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falling unemployment
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Last month Brent lost his job at the auto parts factory because his factory, like many factories, relocated to Asia. Brent has bee looking for similar factory jobs in his town but has found no openings. Brent is best classified as
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Structurally unemployed
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Efficiency wages are
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set above equilibrium wages to act as an incentive for better performance
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If the actual unemployment rate is 7% and the natural rate of unemployment is 5% then the cyclical unemployment is
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2%
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The natural rate of unemployment is
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equal to the sum of frictional and structural unemployment
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Unemployment rates are usually higher in Europe than in the United States because
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Unemployment benefits are more generous in Europe than in the United States
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According to this table February 2009 212.2 February 2010 216.7 February 2011 221.6 February 2012 224.6 the inflation rate between 2011 and 2012 is
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1.4%
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Suppose that the nominal rate of interest is 7% and the inflation rate is 3%. The real rate of interest is equal to
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4%
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To be considered unemployed a person must
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be currently not working but actively seeking employment
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Individuals who give up looking for work because they don't feel that there are good prospects of finding a job are known as
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discouraged workers
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Which of the following individuals would be counted as unemployed? A marginally attached worker A discouraged worker A worker who is underemployed An individual who is currently not working, but is looking for work in a high-paying industry
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An individual who is currently not working, but is looking for work in a high-paying industry
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Which labor market measure includes the underemployed, discouraged workers, and marginally attached workers along with as a measure of labor under utilization
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U6
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The rate of unemployment is found by dividing the
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number of people looking for work by the number of people looking for work plus the number of people employed
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In 2011, 10 million people did not have a job but were actively looking for employment and 85 million people had either a full-time or a part-time job. Based on this information, the unemployment rate in 2011 was
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10.5%
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What most accurately describes how to calculate the unemployment rate
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(Unemployed / labor force) × 100
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Which of the following statements is FALSE? In general, there is a trade-off between inflation and unemployment in the short run. There is a strong negative relation between growth in real GDP and changes in unemployment. Unemployment always rises during recessions. Unemployment always falls during expansions.
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Unemployment always falls during expansions
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For most of U.S. modern economic history, when the unemployment rate is _____, real GDP is _____
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falling; rising
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According to the table Full time employed 20 million Not working but looking for work 2 million Part time employed 10 million Discouraged workers 1 million the unemployment rate is
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6.25%
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A persistent surplus of job-seekers in a particular market gives rise to what is known as
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structural unemployment.
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Minimum wage laws are imposed with the goal of
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helping workers earn enough to afford a basic lifestyle.
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Labor unions contribute to structural unemployment by
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negotiating for wages above the equilibrium level
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The deviation of the actual rate of unemployment from its natural rate is known as
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cyclical unemployment.
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Natural unemployment is equal to
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the sum of frictional unemployment and structural unemployment
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Cyclical unemployment is equal to
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the difference between actual unemployment and natural unemployment
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Internet employment agencies have simplified the job search for the applicants. They have also led to
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a decrease in frictional unemployment
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An example of structural unemployment is a(n): real estate agent who leaves a job in Texas and searches for a similar, higher-paying job in California. worker at a fast-food restaurant who quits work and attends college. autoworker who is temporarily laid off from an automobile company because of a decline in sales. geologist who is permanently laid off from an oil company because of an increase in wages won by labor unions.
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geologist who is permanently laid off from an oil company because of an increase in wages won by labor unions.
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Unemployment that results when there are more people seeking jobs in a labor market than there are jobs available is called
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structural unemployment
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Last month Brent lost his job at the auto parts factory because his factory, like many others, relocated to Asia. Brent and his former co-workers have been looking for similar factory jobs in the town, but they have found no openings. Which of the following best describes what has happened to the labor market in Brent's town?
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The demand for labor has fallen
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Increased costs of transactions caused by inflation are known as
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shoe-leather costs.
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If the actual inflation rate is higher than expected,
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borrowers gain at the expense of lenders
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Disinflation is
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the process of bringing about a decline in the inflation rate
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When hyperinflation forces Emily to visit her bank very frequently to keep her cash holdings to a minimum, economists say that Emily is experiencing a
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shoe-leather cost
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Unit-of-account costs refer to the
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loss of the reliability of money as a relative unit of measurement
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Deflation is a
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decrease in the average level of prices
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When there is deflation in the economy
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the general price level falls
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Which of the following is true? Unexpected inflation benefits borrowers and hurts lenders. Unexpected inflation benefits borrowers but does not affect lenders. Unexpected inflation benefits lenders and hurts borrowers. Unexpected deflation benefits lenders but does not affect borrowers.
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Unexpected inflation benefits borrowers and hurts lenders
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Which of the following is TRUE concerning interest rates? The real interest rate can only be positive. The real interest rate cannot be negative. The real interest rate can be zero, positive, or negative. The nominal interest rate can be negative.
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The real interest rate can be zero, positive, or negative.
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A drop in the inflation rate is called
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disinflation
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The inflation rate
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is the annual rate of increase in the price level
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Structural unemployment occurs when
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the wage rate is persistently above its equilibrium level
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Cyclical unemployment
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is the share of unemployment arising from the business cycle
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The sum of employment and unemployment is known as
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the labor force.
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Actual unemployment is equal to
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the sum of cyclical unemployment and natural unemployment
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The natural rate of unemployment rises when
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there are more new entrants to the labor force
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Most economists agree that a binding minimum wage
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contributes to structural unemployment
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Employment is the total number of people
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who are working either full or part time
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Data on the U.S. economy indicate that
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when the unemployment rate is low, most unemployment is frictional
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If there are discouraged workers,
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the measured unemployment rate may understate the percentage of people who would like to work but are unable to find jobs
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U.S. data from the past 60 years shows that
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falling real GDP is always associated with a rising rate of unemployment
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The unemployment rate is
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the portion of the labor force unemployed
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An efficiency wage is
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a wage set above the equilibrium level in order to motivate employee performance
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The unemployment rate is based on numbers collected from a monthly survey of _______ families
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60,000
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In 2010, _______ percent of unemployed workers were considered long-term unemployed.
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43
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The wage divided by the price level is known as the
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real wage
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Which federal agency calculates the official unemployment rate
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The Bureau of Labor Statistics
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Costs associated with changing a listed price are known as
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menu costs
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Unexpected deflation
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makes it harder for borrowers to repay their loans
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Employment
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the total number of people currently employed for pay in the economy, either full-time or part-time.
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Unemployment
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the total number of people who are actively looking for work but aren't currently employed.
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Labor force
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the sum of employment and unemployment; that is, the number of people who are currently working plus the number of people who are currently looking for work.
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Labor force participation rate
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the percentage of the population age 16 or older that is in the labor force.
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Unemployment rate
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the percentage of the total number of people in the labor force who are unemployed, calculated as unemployment/(unemployment + employment)
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Discouraged workers
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individuals who want to work but who have stated to government researchers that they aren't currently searching for a job because they see little prospect of finding one given the state of the job market.
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Marginally attached workers
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nonworking individuals who say they would like a job and have looked for work in the recent past but are not currently looking for work.
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Underemployment
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the number of people who work part-time because they cannot find full-time jobs.
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Jobless recovery
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a period in which GDP growth rate is positive but the unemployment rate is still rising.
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Job search
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when workers spend time looking for employment.
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Frictional unemployment
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unemployment due to time workers spend in job search.
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Structural unemployment
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unemployment that results when there are more people seeking jobs in a labor market than there are jobs available at the current wage rate.
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Efficiency wages
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wages that employers set above the equilibrium wage rate as an incentive for workers to deliver better performance.
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natural rate of unemployment
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the normal unemployment rate around which the actual unemployment rate fluctuates; the unemployment rate that arises from the effects of frictional and structural unemployment.
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Cyclical unemployment
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the difference between the actual rate of unemployment and the natural rate of unemployment.
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Real wage
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the wage rate divided by the price level
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Real income
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income divided by the price level.
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Shoe leather costs
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(of inflation) the increased costs of transactions caused by inflation.
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Menu costs
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the real cost of changing a listed price
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Unit of account costs
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(of inflation) costs arising from the way inflation makes money a less reliable unit of measurement.
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Interest rate
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the price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year.
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Nominal interest rate
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the interest rate in dollar terms.
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Real interest rate
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the nominal interest rate minus the inflation rate.
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Disinflation
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the process of bringing down inflation that has become embedded in expectations
