Chapter 6: Prices and Unemployment – Flashcards
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The CPI in the base year equals
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100
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Smith's real income has not risen between years 1 and 5 although his nominal income and the price level have both risen. It follows that
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Smith's nominal income increased by the same percentage as the price level increased.
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If total dollar expenditure on the market basket is greater in the current year than in the base year, which of the following could have occurred?
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1. Prices of all the goods in the market basket increased 2. Prices of some of the goods in the market basket increased, while prices of other goods in the market basket decreased
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In setting A, Harriett loses a job and finds another job doing what she did in the first job. In setting B, Jack loses a job and finds another job doing something very different than what he did in the first job. It follows that while Harriet was unemployed, she was _____ and while Jack was unemployed, he was ____ unemployed.
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Frictionally, structurally
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When the economy is operating at full employment, the actual unemployment rate is
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Equal to the natural unemployment rate
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Which of the following statements is true? Check all that apply.
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1. The natural unemployment rate minus the structural unemployment rate equals frictional unemployment rate. 2. The actual unemployment rate is equal to the structural unemployment rate + frictional unemployment rate + cyclical unemployment rate
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The labor force participation rate is equal to
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Civilian labor force divided by the civilian noninstitutional population.
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The employment rate is equal to
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The number of employed persons divided by the civilian noninstitutional population.
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If the unemployment rate is 4 percent, it does not follow that the employment rate is 96 percent, because
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The denominator of the unemployment rate is the civilian labor force and the denominator of the employment rate is the civilian noninstitutional population.
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Bob starts off as part of the noninstitutional population and is in the civilian labor force. Under which scenarios would Bob be considered unemployed?
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1. Bob is not working but is waiting to be called back to a job from which he has been temporarily laid off 2. Bob has made specific active efforts to find a job during the last four weeks and is available to work
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If Brian quits his job with a local fast food restaurant and is looking for a better job then Brian is ____. If Andrew was previously employed, hasn't worked for some time, and is returning to the labor force then Andrew is a ____.
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Job leaver; reentrant
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_____ worker is out of work and searching for work, whereas an ______ worker is out of work and not searching for work.
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An unemployed; discouraged
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The price of a singe good, oranges for example, has risen. It follows that the price level has also risen. True or false?
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False
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If you are more than keeping up with inflation then your nominal income has risen by a _______ than inflation.
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Greater percentage
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Kristen currently earns a _____ wage of $12.00 per hour; in other words, the amount of her paycheck each week is $12 times hours worked. If the price of milk is $4.00 per gallon; in this case, Kristen's ___ wage, in terms of the amount of milk she can buy with her paycheck, is _____ of milk per hour.
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Nominal, real, 3 gallons.
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When workers and firms negotiate compensation packages, they have expectations about the price level (and changes in the price level) and agree on a ____ wage with those expectations in mind. If the price level turns out to be higher than expected, a worker's ___ wage is ___ than both the worker and the employer expected when they agreed to the wage.
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Nominal; real; lower
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The GDP deflator for this year is calculated by:
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Dividing the value of all goods and services produced in the economy this year (using this year's prices) by the value of all goods and services produced in the economy this year (using the base year's prices).
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What is the difference between the CPI and the GDP deflator?
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The CPI calculates the changes in price level for the market basket of goods and services, whereas the GDP price deflator calculates all goods and services produced in the economy.
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There is decrease in the price of a Treewood Equipment feller buncher, which is a commercial forestry machine that cuts and stacks trees. Will this affect the GDP deflator, the CPI or both?
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GDP price deflator, because the GDP price deflator includes all goods and services produced in an economy. It would not be included in the CPI because forestry equipment is not something a typical U.S. consumer would purchase.
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The price of a German-made car that is popular among U.S. consumers increases. Will this affect the GDP deflator, the CPI or both?
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The increase in the price of the German-made car will be reflected in the CPI because it is popular among U.S. consumers. It will not affect the GDP price deflator because it is a foreign produced car.
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Carlos is a 45-year-old autoworker who was laid off from his job 6 months ago. He is frustrated with his inability to find a new full-time position. Last week, he took a part-time job but was given only 3 hours of work.
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Employed
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Deborah is a 42-year-old autoworker who was just laid off by her employer. She is trying to find any kind of job to help make ends meet.
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Unemployed
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Felix is a 45 year old accountant who has been out of work for almost a year. He became so discouraged that, a couple of months ago, he gave up on his job search.
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Not in the labor force
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Megan is a 31-year-old science teacher who taught at West Valley Middle School last year. Due to budget cuts, she was laid off at the end of the school year. It's the summer now, and after a few weeks of vacation with her family, she is looking for a part-time job as a tutor.
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Unemployed
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Larry is a 20-year-old American studies major at the University of Tennessee. It's summer now, and he is working as a lifeguard in Mobile, Alabama.
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Employed
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Janet is a 10-year-old student at West Valley Middle School. She babysits her younger sister and does other chores for which her parents give her an allowance of $25 per week.
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Not in the labor force
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Robert is looking for a job where he can utilize his recent master's degree as well as his previous job experience.
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Reentrant
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Caroline was laid off from the gold mine where she worked, because a recession caused a decrease in demand for metals.
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Job loser
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Clancy is looking for his first-ever summer job.
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New entrant
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Brian quit his part-time job to search full time for a job that more closely matches his education.
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Job leaver
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True or False: If an economy is at full employment, no members of the civilian labor force are seeking work.
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False. Full employment occurs when the economy's output at its natural level, not its maximum level. At full employment there is still a natural rate of unemployment, which consists of the frictionally and structurally unemployed.
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What is a discouraged worker?
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Marginally attached workers who have searched for a job sometime within the last 12 months, but have now stopped searching because they feel that there are no current opportunities for them in the labor market.
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What is a marginally attached worker?
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A person who is not in the labor force but is available to work and would like to have a job.
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Susan was a highly skilled instrument maker, but she hasn't been able to find work in the field since her workshop closed due to competition from instrument makers in China.
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Structural unemployed
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Janis was laid off from the gold mine where she worked, because a recession caused a decrease in demand for metals.
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Cyclical unemployment
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Becky's contract ended last week, and her next contract doesn't start until next week.
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Frictional unemployment
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Imagine an economy where the structural rate of unemployment is 5% and the frictional rate of unemployment is 2.5%. In this economy the natural rate of unemployment would be ___ and the cyclical rate of unemployment would be ____
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7.5%; ?%
