ECO202 A9 – Flashcards

The unemployment rate is the ratio of the number of working adults divided by all adults. number of unemployed persons divided by the labor force. proportion of the adult population looking for work. number of adults divided by the labor force.

If the unemployment rate increases, the size of the labor force must decrease. will not change. must increase. could increase or decrease.

A positive unemployment rate—one more than zero percent—is fully compatible with full employment because at full employment, the economy is producing at capacity. there is usually some unemployment due to the business cycle. unemployment includes seasonal unemployment, which is usually positive because people are transitioning to new jobs. unemployment includes frictional unemployment, which is always positive because people are transitioning to new jobs.

In general, unemployment rates are higher for less-educated workers, African Americans, workers in lower-skilled occupations, and women. African Americans, Hispanics, women, and less-educated workers. African Americans, Hispanics, workers in lower-skilled occupations, and less-educated workers. workers in lower-skilled occupations, Hispanics, women, and less-educated workers.

The average length of time people are unemployed rises during a recession because retraining takes longer during recessions. unemployment compensation is equal to what people would earn if they were working. most workers receive unemployment compensation and don't want to work. businesses continue to lay-off workers as a result of the decrease in demand.

The Consumer Price Index (CPI) is constructed by estimating the prices of goods and services in the economy at the same rate as the cost of living increases. comparing the value of a "market basket" of goods that consumers typically purchase to the value of the basket in cities around the country. comparing the value of a "market basket" of goods that consumers typically purchase to the value of the basket in a base year. averaging all prices of goods and services in the economy.

The nominal interest rate plus the inflation rate is the real interest rate. minus the price interest rate is the inflation rate. minus the inflation rate is the real interest rate. plus the real interest rate is the inflation rate.

A negative GDP gap is associated with international inflation. cost-push inflation. output inflation. demand-pull inflation.

A positive GDP gap is associated with international inflation. demand-pull inflation. cost-push inflation. output inflation.

An increase in your nominal income and a decrease in your real income can occur simultaneously if your nominal income increases more than the cost of living increases. real income increases at the same rate as the cost of living increases. real income increases more than the cost of living increases. nominal income increases less than the cost of living increases.

The losers from inflation are those with no savings. significant debt. fixed incomes in nominal terms. incomes that increase at the rate of inflation.

Those who lose the most from unemployment are those with the highest living standards. minority groups and those with the least skill. those that paid the least in taxes. those with the most skill.

Consider the choice between (a) full employment with a 6 percent annual rate of inflation or (b) price stability with an 8 percent unemployment rate. Which of the following statements is true? Option (a) might encourage expansionary policies that aggravate inflation, whereas option (b) might lower spending and push the economy toward deflation. Option (a) risks inflationary expectations that will give rise to creeping inflation, whereas option (b) might lower spending and push the economy toward deflation. Option (a) risks inflationary expectations that will give rise to creeping inflation, whereas option (b) might encourage expansionary policies that push the economy toward inflation. Option (a) might encourage expansionary policies that aggravate inflation, whereas option (b) might encourage expansionary policies that push the economy toward inflation.

Hyperinflation might lead to a severe decline in total output if everyone starts spending more to avoid inflation. taxes go up so that income falls. people save more because interest rates are falling. everyone starts speculating and searching for ways to avoid inflation.