question

unemployed

answer

jobless, looking for jobs within the last 4 weeks, available for work total number of people who are actively looking for work but aren't currently employed

question

employment

answer

total number of people currently employed full or part time

question

unemployment always rises during __and usually (but not always) __during periods of economic expansion

answer

recessions falls

question

to measure unemployment what happens?

answer

every month the Census Bureau contracts 60,000 HH to determine their economic activity it asks a series of questions that the Bureau of Labor Statistics uses to determine unemployment

question

labor force=

answer

employed + unemployed all workers, employed or unemployed

question

labor force participation rate =

answer

(unemployed + employed OR labor force / adult population) X 100

question

what is labor force participation rate

answer

the percent of the adult (16+) non institutionalized civilian population who are working or actively looking for work percentage of adults in the labor force

question

unemployment rate (%) =

answer

unemployed / (unemployed + employed OR labor force) x 100

question

the unemployment rate is ___

answer

the percent of the labor force without a job the percent of the total number of people in the labor force who are unemployed

question

if the unemployment rate is 4% then __. if 9% then __.

answer

jobs abundant jobs very hard to find

question

can unemployment rate fall to 0?

answer

unemployment rate can never fall to 0 (because worker who is confident of finding a job, but not accepted position is unemployed. frequently ppl who would like to work but aren't working still don't get counted as unemployed)

question

the unemployment rate is a good indicator of __

answer

how easy or difficult it is to find a job given the current state of the economy

question

how can it overstate the true level of unemployment?

answer

even if the labor market is healthy, it takes time to find the right job (meanwhile, you're unemployed)

question

how can it understate the true level of unemployment?

answer

you are not "unemployed" if you have given up looking for a job because there are no jobs available

question

problems with unemployment statistics

answer

1. discouraged workers 2. marginally attached workers 3. underemployed workers

question

discouraged workers

answer

nonworking people who have given up looking for work for the time being. not considered unemployed this may understate % of people who want to work but are unable to find jobs

question

marginally attached workers

answer

those who were available and actively looked for work recently but are not currently looking (in the past 12 months but not in the past 4 weeks) are considered unemployed

question

underemployed workers

answer

people who work part time because they cannot find full-time jobs aren't counted as unemployed

question

the deeper the recession, the __ discouraged workers there are.

answer

more

question

so how good an indicator is the unemployment rate? what doesn't it measure?

answer

not perfect doesn't measure the quality of jobs or how well people are matched to their jobs

question

besides unemployment rate, economists also look at other indicators such as

answer

labor force participation rate number of full-time jobs average wages

question

the prime age for employment is

answer

age 25-54

question

unemployment and recession chart

answer

shaded areas are recessions

question

during every recession the unemployment rate __

answer

rose

question

during economic expansion unemployment rate __

answer

decrease economic expansions aren't always periods of falling unemployment (although economy is growing, not fast enough to reduce unemployment)

question

jobless recovery also called

answer

"growth recession" a period in which the real GDP growth rate is positive but the unemployment rate is still rising (growing at a below-average rate)

question

generally there is a __ relationship btw growth in the economy and the rate of unemployment

answer

negative

question

graph with change in unemployment rate (vertical axis) and real GDP on horizontal axis strong negative relationship btw growth in econ and unemployment is shown by a __ in 2000 avg unemployment rate fell to 4% from 4.2%. this is shown as __ real GDP grew by 3.7%. this is shown__ points to right of green line are years points to left of green line are years low/neg growth in real GDP means that unemployment_ years of high growth in real GDP means that unemployment__

answer

downward trend shown as a value of -.2 along vertical axis shown along horizontal axis above average growth, unemployment decreased below-average growth, unemployment increased increased decreased

question

times of high unemployment are especially hard on __

answer

new graduates

question

many workers moved into and out of both employment and unemployment each month because jobs are constantly being ___ and ___

answer

created and destroyed

question

over past half-century (50 years) national unemployment rate has never dropped below

answer

2.9%

question

some unemployment is __

answer

natural

question

there are 3 types of unemployment:

answer

1. frictional 2. structural 3. cyclical

question

workers who spend time looking for employment are engaged in ___. if all workers and jobs were __ then this wouldn't be necessary

answer

job search alike

question

reasons for job loss 1. 2.

answer

1. structural change in the economy (industries rise and fall as new technologies emerge and tastes change) 2. poor management performance/bad luck at companies

question

frictional unemployment

answer

unemployment due to the time workers spend in job search

question

__ creates frictional unemployment

answer

scarcity of information matching people to jobs takes time economy is more productive if workers find jobs that are well matched to skills

question

when there is a low unemployment rate, periods of unemployment tend to be ___, suggesting that ___

answer

short much of the unemployment is frictional (opposite for high unemployment)

question

frictional unemployment can be result of ___ frictional unemployment includes those __

answer

new people entering labor force includes those involved in search

question

structural unemployment

answer

more people are seeking jobs in a particular labor market than there are jobs available at the current wage rate, even when the economy is at the peak of the business cycle

question

structural unemployment occurs when the wage rate is __

answer

persistently above We (equilibrium wage rate)

question

even at We (equilibrium wage rate), there will be ___

answer

some frictional unemployment but no structural

question

some causes of structural unemployment

answer

labor unions efficiency wages side effects of government policies mismatches btw employees and employers - sufficiently high minimum wage

question

labor unions sometimes

answer

increase wages above the equilibrium

question

by bargaining collectively for all of a firm's workers, unions can often win ___ from employers than workers would have obtained by bargaining individually this is called__

answer

higher wages collective bargaining

question

labor unions exercise bargaining power by __

answer

threatening firms with labor strike (refusal to work) (employers use lock-outs)

question

unionized workers earn higher wages, unions push the wage that workers receive ___, consequently ___

answer

above the equilibrium wage consequently there are more people willing to work at the wage being paid than there are jobs available, and this leads to structural unemployment

question

efficiency wages

answer

wages that employers set above the equilibrium rate as incentive for better employee performance

question

when may firms pay efficiency wages, the result is__

answer

a pool of workers who want jobs but can't find them, so this leads to structural unemployment

question

side effects of government policies such as

answer

unemployment insurance policies designed to help workers who lose their jobs replace small fraction of worker's income and expire after 26 weeks

question

generosity ___ worker's incentive to quickly find a new job

answer

reduces

question

mismatches btw employees and employers

answer

geography or skills adjusting to shifts in economy mismatch btw what employees have to offer and what they are looking for

question

until mismatch is resolved through a big enough fall in wages of the surplus workers that induces re-training or relocation, there ___

answer

will be structural unemployment

question

labor demand curve indicates that when the price of labor--the wage rate-- ___, employers demand __ when price of labor increases, more workers are willing to __ at the prevailing wage rate. these two forces coincide to lead to __

answer

increases less labor supply labor equilibrium wage rate

question

America's minimum wage is __

answer

low

question

minimum wage is

answer

gov't mandated floor on price of labor

question

union

answer

an association of workers that bargains collectively with employers over wages, benefits, and working conditions unions take many forms: some acts to increase wages simply by restricting entry into a profession with licensing requirements

question

since reunification in 1989, East Germany's economy__

answer

has remained depressed with productivity low and structural unemployment high

question

structural unemployment on a wage rate vs. quantity of labor graph

answer

labor supply - labor demand where they intersect with minimum wage

question

when minimum wage (Wf) is greater than equilibrium wage (We) then there is a __ when quantity of labor supplied is greater than quantity of demanded then ___

answer

surplus structural unemployment

question

btw 1980 and 2000

answer

decrease in natural rate of unemployment because of internet communication, growth of temporary worker industry, aging baby generation at age when they keep existing jobs

question

frictional and structural unemployment are always present, they are __

answer

natural

question

natural rate of unemployment

answer

the unemployment rate that arises form the effects of frictional plus structural unemployment normal unemployment rate around which the actual unemployment rate fluctuates

question

natural unemployment =

answer

frictional + structural

question

actual unemployment =

answer

natural unemployment + cyclical unemployment

question

cyclical unemployment

answer

unemployment correlated with the business cycle--the deviation form the natural rate the share of unemployment that arises from the downturns of the business cycle difference btw actual and natural rates of unemployment

question

lower growth is usually correlated with higher unemployment for two 2 reasons:

answer

1. when GDP falls, firms lay off workers 2. idle labor and capital---economic growth not being maximized --- down ability of the economy to create more jobs

question

we need ___ both to make forecasts and to conduct policy analyses

answer

estimates of the natural rate of unemployment

question

what causes the natural rate of unemployment to change?

answer

changes in characteristics of the labor force changes in labor market institutions changes in government policies

question

changes in characteristics of the labor force

answer

changing demographics unemployment rates lower for experienced than inexperienced--lower frictional unemployment

question

changes in labor market institutions

answer

unions, temp employment agencies, and new technology (internet sites) agencies---reduced frictional unemployment

question

changes in government policies

answer

job training programs

question

if wages for unskilled workers can't go down then there is an ___ and higher rate of ___ would result

answer

increased structural unemployment unemployment would results

question

in the 1970s: __

answer

women and baby boomers join the labor force in droves so natural rate of unemployment rose during this time

question

if union membership decreases, unemployment __

answer

decreases

question

inflation __ the economy

answer

hurts

question

real wage

answer

is the wage rate divided by the price level

question

real income

answer

is income divided by the price level

question

inflation does not ___ because ___

answer

make everyone poorer incomes often rise with prices

question

how inflation works

answer

would not be richer if we went to price level in 1962, becuase although prices would be lower, so would wages and incomes like replacing a dollar with a new dollar at an exchange rate of say 7 to 1, if you owed $140,000 on your home that debt would be $20000

question

real income =

answer

nominal - inflation

question

there is a difference between level or prices and inflation rate

answer

...

question

inflation rate =

answer

price index in year 2 - price index in year 1 / price index in year 1

question

from the 1900s to today __ has continually increased, and __ fluctuates.

answer

consumer price index inflation rate (negative rate)

question

high rates of inflation impose the following economic costs

answer

shoe-leather menu unit of accounts

question

shoe-leather costs

answer

the increased costs of transactions caused by inflation

question

shoe-leather costs of inflation in Israel

answer

when the inflation rate hit 500% in 1985, people spent a lot of time in line at banks

question

with shoe-leather costs, __ grows

answer

bank sector

question

shoe-leather costs of inflation cause an allusion to the so people __

answer

wear/tear caused by running around trying to avoid holding money so people take money to bank to convert cash into something that would hold value, such as stable foreign currency

question

high inflation rate discourages people from holding money because

answer

purchasing power of cash in your wallet and funds in your bank account steadily erode as overall level of prices increases

question

menu costs

answer

the real cost of changing a listed price firms forced to change prices more often than if price level was stable--so this means increase costs for economy (they are also available in low inflation economies, but aren't severe) example: change in supermarket money

question

menu costs are __ important now because

answer

less now it is easier because electronic (no stickers)

question

with menu costs companies many use

answer

artificial unit or a more stable currency (such as US dollars)

question

unit of account costs

answer

costs arising from the way inflation makes money as less reliable unit of measurement calculations are hard when inflation is high

question

unit of accounts costs are important in __ because

answer

tax system inflation can distort the measures of income on which taxes are collected

question

with unit of account costs the role of the dollar as a basis for contracts and calculations __

answer

can be degraded by inflation, which causes the purchasing power of a dollar to change over time

question

example of unit of account costs

answer

assume inflation rate 10% so overall level of prices rises 10% each year. buys land $100,000, resells 1 year later for $110,000 in fundamental sense, business didn't make a profit, but US tax law would say that the business made a capital gain of $10,000 and it would have to pay taxes on it

question

unit of account costs causes difficulty in __ and can reduce __

answer

firms/individuals financial planning quality of economic decisions

question

if inflation is different from predictions, __

answer

some will lose and some will benefit

question

interest rate

answer

the price (calculated as a percentage of the amount borrowed) that a lender charges for the use of his or her savings for one year return a lender receives for allowing borrowers the use of their savings for 1 yr

question

nominal interest rate

answer

the interest rate expressed in dollar terms example: interest rate on student loan

question

real interest rate

answer

the nominal interest rate minus the rate of inflation if loan carries interest rate of 8%, 5% inflation, real interest rate is 3%

question

loan

answer

borrower receives a certain amount of funds at the beginning, and the loan contract specifies the interest rate on the loan and when it must be paid off

question

contract is normally written in __

answer

dollar terms---nominal interest rate

question

if the actual inflation rate is higher than expected,

answer

borrower gain at the expense of lenders borrowers will repay their loans with funds that have a higher real value than had been expected

question

if the actual inflation rate is lower than expected,

answer

lenders gain borrowers must repay loans with funds that have a higher value than had been expected

question

look at example of page 10

answer

...

question

in modern America, __ are the most important sources of gains and losses from inflation

answer

home mortgages Americans who took out mortgages in the early 1970s quickly found their real payments reduced by higher-than-expected inflation by 19883, the purchasing power of a dollar was only 45% of what it had been in 1973

question

unexpected deflation

answer

surprise fall in price level creates winners and losers too

question

why do policy makers move forcefully to bring inflation back down when it creeps above 2% to 3%?

answer

because the policies needed to slow prices usually cause unemployment

question

disinflation

answer

the process of bringing th inflation rate down

question

disinflation is ___ once a higher rate of inflation has become well established

answer

difficult and costly

question

in countries with high and uncertain inflation long term loans are __, which makes it hard to make __

answer

rare long-term investments

question

uncertainty about the future inflation rate discourages people from entering into any form of __

answer

long-term contract

question

in each episode, unemployment/inflation followed a sort of __

answer

clockwise spiral with high inflation gradually falling in the face of an extended period of high unemployment

question

in the 1970s and early 1980s, bringing inflation down required a temporary but very large increase __

answer

the unemployment rate

question

period of high unemployment that temporary depressed the economy were necessary to reduce inflation. to avoid this, __

answer

avoid have an inflation problem in the 1st place

question

which of the following doesn't influence natural rate of unemployment a. recessions b. demand of labor c. gov't policy d. age distribution e. increase use of internet for job search

answer

...

question

james- architect laid off due to slump in demand for property feels like he will have to wait until economy picks up

answer

cyclical

question

sarah recent graduate, entering difficult labor market due to continued recession. continuing to look for work, but difficult

answer

cyclical

question

experienced project manager, lost job because company's product failed to take off. confident he can get a new job. rejected lots of offers

answer

frictional

question

craig lost job several months ago. reluctant to get new job as he feels that he can make almost as much $ on welfare

answer

structural

question

hamid graduate as lawyer. confident of getting job, already refused a few lower paid jobs

answer

frictional

question

unexpected inflation Joy borrowed $40000 to pay 4 college education

answer

loser

question

unexpected inflation US federal gov't which had almost $15 trillion in debt in 2011

answer

loser

question

unexpected inflation Herb keeps savings in piggy bank

answer

gain

question

unexpected inflation bank loaned people money for home purchases

answer

gain

question

unexpected inflation retired teacher relies upon her fixed pension to pay for her expenses

answer

gain

chapter 8- econ – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards