Chapter 13 – Economics

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frictional unemployment structural unemployment seasonal unemployment cyclical unemployment factors outside the econ.
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types of unemployment
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frictional unemployment
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occurs when people take time to find a job
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structural unemployment
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occurs when workers’ skills do not match those needed for the jobs that are available.
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development of new tech. discovery of new resources changes in consumer demand globalization lack of edu.
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causes of structural unemployment
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globalization
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the shift from local to global markets as countries seek foreign trade and investment
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seasonal unemployment
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occurs when industries slow or shut down for a season or make seasonal shifts in their production schedules
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cyclical unemployment
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unemployment that rises during economic downturns and falls when the economy improves
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terrorist attacks (9/11) natural disasters (hurricane Katrina)
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factors outside the econ. that affect unemployment
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US census bureau conducts monthly household surverys
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How is employment measured
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total number of unemployed and employed people
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total labor force
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# of unemployed divided by the total labor force and then mult. by 100
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unemployment rate is calc. by?
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seasonally adjusted
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the unemployment rate has been adjusted to account for the level of seasonal unemployment
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4-6%
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What % of unemployment is health?
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underemployed
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a person working a job for which . they are over-qualified OR a person who is working part-time but wants a full-time job
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discouraged workers
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workers who have given up hope of finding work (are not a part of the unemployment number because they are not actively looking for a job)
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Inflation
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a general increase in prices across the economy
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purchasing power
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the ability to purchase goods and services
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purchasing power
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inflation shrinks what?
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declines
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as prices rise, the purchasing power of money?
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price index
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a measurement that shows how the average price of a standard group of goods changes over time
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rising
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a consumer might save more toward the purchase of a durable good if prices are?
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rising
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a govt. official might suggest a rise in minimum wage if prices are?
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market basket
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a representative collection of goods and services
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consumer price index
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determined by measuring the price of a standard group of goods meant to represent the “market basket” of a typical urban consumer
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inflation rate
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the percentage rate of change in price level over time
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updated cost/ base period cost X 100
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how to calc. the CPI
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1-3%
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what percentage of inflation generally doesn’t cause a problem in the economy
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core inflation rate
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the rate of inflation excluding the effects of food and energy prices
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hyperinflation
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inflation that is out of control and can lead to a total economic collapse
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quantity theory of inflation
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What theory states that too much money in the economy causes inflation?
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aggregate demand
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the amount of goods and services in the economy that will be purchased at all possible price
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inflation occurs when producers raise prices in order to meet increased costs
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inflation in aggregate supply
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occurs when demand for goods and services exceeds existing supplies
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inflation in aggregate demand
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wage price spiral
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the process by which rising wages cause higher prices and higher prices cause higher wages
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the dollar will not buy the same number of goods as it did in years past
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an effect of inflation on purchasing power
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workers’ wages increase as inflation increases, but their real income stays the same; if workers’ wages do not increase as much as inflation does their real income has decreased
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an effect of inflation on income
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fixed income
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income that does not increase even when prices go up
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if inflation rate is higher than the bank’s interest rate, savers lose money
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When a bank’s interest rate matches the inflation rate, savers break even
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1990s
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a trend in inflation in which there was low employment, and less that 3% inflation
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2000s
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a trend in inflation in which there was than 2% inflation and rising unemployment and falling capital investment
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2007
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a trend in inflation in which there was rising energy prices which pushed up the CPI, and there was less than 4% inflation
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2008
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a time in which rising inflation was a worry, CPI increased, and sharp price increases for food and gasoline existed
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poverty threshold
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income level below which income is insufficient to support a family or household (varies w/ the size of the family)
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poverty rate
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the percentage of people who live in households with income below the official poverty threshold (differ by groups)
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twice
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The poverty rate among African Americans, Hispanics, and Native Americans is more than _____ the rate for white Americans
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6
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families with a single mother have a poverty rate that is ____ times greater than two-parent families
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children
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What is the largest age group living in poverty?
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double
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Inner residents have ___ the poverty rate than those who live outside of the inner city
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-shifts in family structure -location -racial and gender discrimination -growth of low skill service jobs -lack of edu.
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5 causes of poverty
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income distribution
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the nation’s total income is distributed among its population
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Lorenz curve
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illustrates the distribution of income in the economy; the larger the areas between the curves, the greater the income inequality
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income gap
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difference in skills/edu., inheritances, and field of work is the reason for ?
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-earned income tax credit -enterprise zones -employment assistance -housing assistance -welfare reform
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5 antipoverty policies
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earned income tax credit
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a refundable tax credit that low-income families with children receive when they file their federal income tax return
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enterprise zones
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areas where companies can locate and be free of certain state, local, and federal taxes and restrictions on business operations
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housing assistance
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programs that help the poor obtain affordable housing; govt. payments to landlords, vouchers, and govt. owned houses are examples
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workfare
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a program requiring work in exchange for temporary assistance from the govt.
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false
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True or False: Full employment occurs when the unemployment rate is zero.
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increase
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Usually, in periods of low unemployment, inflation rates __________.
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recession
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The highest unemployment rates would be found during?
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>3%
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At which inflation rate, would inflation become unstable and unpredictable?
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likely to occur
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If the aggregate demand increases but the aggregate supply does not, inflation is
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cyclical
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Which type of unemployment is not commonly found in a healthy economy?
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structural unemployment
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Globalization can cause?

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