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91 terms

CH 9 Macro

STUDY
PLAY
Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population
labor force participation rate
In the modern US economy, the typical unemployed person stays unemployed for
a relatively short time, less than six months
If the price level rose in three consecutive hers from 100 to 120 to 140, then the annual inflation rate over those years would
decrease
Suppose you lend $1,000 at an interest rate of 10% over the next year. If the expected real interest rate at the beginning of the loan contract is 4%, then what rate of inflation over the upcoming year would be most beneficial to you as the lender?
equal to 0%
Assume the average annual CPI values for 2010 and 2011 were 207.3 and 215.3, respectively. What was the percent increase in the CPI between these two years?
3.86
Suppose you borrow $1,000 at an interest rate of 12%. If the expected real interest rate is 5%, then the rate of inflation over the upcoming year that would be mot beneficial to you would be a rate of inflation
greater than 7%
The Bureau of Labor Statistics would categorize a retiree who is not working as
out of the labor force
Which of the following would decrease the unemployment rate
government aid to retrain unemployed workers
The labor force equals the number of people
employed plus unemployment
Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid
3%
When deflation occurs
the real interest rate is greater than the nominal interest rate
Efficiency wages cause unemployment because
firms pay wages that are above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied
Using a broader measure of the unemployment rate where discouraged workers and part-time workers who wished to work full time were counted as unemployed, the BLS estimates the unemployment rate in September 2011 would have _____ compared to the measured unemployment rate
increased by more than 7 percentage points
An advantage of the establishment survey over the household survey of the labor marker is that the establishment survey
is based on actual payrolls, rather than on unverified answers
The recession of 2007-2009 and its aftermath had different effects on various sectors of the economy. Which of the following sectors of the US economy had the highest unemployment rate in August 2011, topping 12%
construction
Which of the following policies would reduce frictional unemployment
building an online job database that helps workers find jobs
The consumer price index implicitly assumes that the demand curve for each good and service in the representative market basket is
vertical
If inflation is positive and is perfectly anticipated
those that hold paper money lose
The increased generosity of unemployment insurance programs in Canada as compared to the United States should
increase the duration of unemployment in Canada as compared to the United States
Suppose that in 2012, all prices in the economy double and that all wages and salaries have also doubled. In 2012 you
are no better off or worse off than you were in 2011 as the purchasing power of your salary has remained the same
The advice to "retain" would be most appropriate for which of the following types of unemployment
structural unemployment
You earned $30,000 in 1990, and your salary rose to $80,000 in 2011. If the CPI rose from 82 to 202 between 1990 and 2011, which of the following is true
the purchasing power of your salary increased between 1990 and 2011
If the nominal rate of interest is 6.5% and the inflation is 3% what is the real rate of interest
3.5%
Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about
one half to one percentage point
Minimum wage laws cause unemployment because the legal minimum wage is set
above market wage, causing labor demanded to be less than labor supply
Which of the following is not an example of inflation causing a redistribution of income because the inflation was unanticipated
firms have to hire an extra worker to change prices in its store because of inflation
Suppose the government launches a successful advertising campaign that convokes workers with high school degrees to quit their jobs and become full time college students. This would cause
the labor force participation rate to decrease
The BLS would categorize a person as _____ if they were temporarily away from their job because they were ill
employed
If firms pay what are called "efficiency wages", they pay wages that
motivate workers to increase their productivity
Since 1948, the labor force participation rate for adult men has ____ and for adult women has ____
decreased; increased
If the BLS counted persons that are on active military service in the totals for employment, the labor force, or the working age population, this would
decrease the measured unemployment rate
An unemployment insurance program has which of the following effects
it increases the amount of time spent searching for a job
Which of the following is true about the consumer price index
it assumes that consumers purchase the same amount of each product in the market basket each month
The unemployment rate is an important economic statistic that can tell us about the health of the economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect
that stock prices are more likely to fall
In September 2011, Bank of America laid of 30,000 employees. The laid off employees were not able to find jobs at an other bank due to a permanent decline in business in the financial industry would be considered
structurally unemployed
Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as
not in labor force
The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation; but _____ quality increases. This causes the CPI to ____ the cost of the market basket
not; overstate
An increase in unemployment insurance payments would in effect, ____ the amount of time spent searching for a job which would increase ____ unemployment
increase; frictional
Which of the following describes a situation in which the person is hurt by inflation
a person paid a fixed income during an inflationary period
Labor force participation is what formula
employment/total (un)employment *100
If the minimum wage is set above the market wage
unemployment will rise
Which of the following policies would reduce structural unemployment
job retaining program
The nominal interest rate equals the real interest rate ___ the inflation rate
plus
The real wage equals the nominal wage ____ the CPI, all times 100
divided by
During the Great Depresison, cyclical unemployment increased as the recession continued. This increase is cyclical unemployment
had no effect on the natural rate of unemployment
Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would
increase the measured labor force participation rate
Which of the following price indices comes closest to measuring the cost of living of the typical household
consumer price index
The producer price index measures the prices that firms
receive for the goods and services they use at all stages of production
Which of the following would increase the unemployment rate
an increase in unemployment insurance payments
WHen actual inflation is less than expected inflation
borrowers lose and lenders gain
The substitution bias in the consumer price index refers to the idea that consumers ____ the quantity of products they buy in response to price, and the CPI does not reflect this and ___ the cost of the market basket
change; over estimates
An advantage of the household survey over the establishment survey of the labor market is that the household survey
includes the number of self employed persons
Suppose that at the beginning of a loan contract, the real interest rate is 4% and expected inflation is currently 6%. If actual inflation turns out to be 7% over the loan contract period, then
borrowers gain 1% of the loan value
After the recession of 2007-2009, the unemployment rate peaked at 10.1% in October 2009. 23 months later, it had
declined by only 1% point
The real interest rat equals the nominal interest rate ____ the inflation rate
minus
Suppose the labor force stays constant, and the working age population stays constant, but a greater number of persons who were unemployed become employed. The labor force participation rate will
remain constant
The average period of unemployment was ____ following the 2007-2009 recession as following any other recession since the end of World War 2
twice as high
The natural rate of unemployment is the amount of unemployment
associated with the business cycle
Structural unemployment is the result of
a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs
Which of the following explains the changes in the US adult male labor force participation rate since 1948
younger men are remaining in school longer as compared to the past
To reduce the bias in the consumer price index, the BLS
updates the market basket every 2 years, rather than every 10
Formula for unemployment rate
(unemployment/ employment) *100
Which of the following would be a consequence of substitution bias in the CPI
businesses would over compensate employees for inflation when giving the cost of living rises
According to the text, economists consider full employment to occur when
the unemployment rate consists only of frictional and structural unemployment
The cost to firms of changing prices
is a menu cost
The average price of goods and services in the economy is also known as
price level
Frictional unemployment is a result of
the search process of matching workers with jobs
The unemployment rate equals the number of unemployed divided by the ____, all times 100
labor force
Most of the unemployment that occurred during the Great Depression was
cyclical unemployment
If your nominal wage rises faster then the price level, we can say your real wage has _____ and the purchasing power of your income has _____
risen; risen
Which of the following cause the unemployment rate as measured by BLS to understate the true extent of joblessness
discouraged workers
Full employment is not considered to be zero unemployment because
people do not find jobs instantaneously
A student who just graduated from college but has not yet found a job would most likely be
frictionally unemployed
Suppose that the labor movement has a revival in the US and the majority of workers join labor unions. As as result we would expect
the unemployment rate to rise
The economy has gone into recession. You have majored in computer science and have difficulty finding a job. Should you go back to school and get a second major
No, recession will most likely be short lived and you can find a job afterwards
Based in part on the aftermath of the financial crisis that began in 2008 and the speed of the recovery of the U.S. economy following the recession of 2007-2009, Bank of America ________ the number of persons it employed in September 2011 and this ________ the total number of persons unemployed in the economy.
decreased; increased
Which of the following would be the best measure of the cost of living
consumer price index
The Bureau of Labor Statistics has taken several steps to reduce the bias in the consumer price index. following is not one of the steps taken to reduce the bias?
incorporating substitutions by consumers when prices of specific products rise rapidly
A lumberjack loses his job because timber cutting restrictions were imposed by the EPA to protect the spotted owl habitat. This lumberjack would be
structurally unemployed
If cyclical unemployment is eliminated in the economy then
the economy is considered to be at full employment
The advice to "keep searching, there are plenty of jobs around here for which you are qualified" would be most appropriate for which of the following types of unemployment
frictional unemployment
The "new product bias" in the consumer price index refers to the idea that
new products prices often decrease after their initial introduction, and the CPI is adjusted infrequently and overestimates the cost to consumers
Cyclical unemployment is the result of
a slowdown in the economy
WHen prices are rising, which of the following will be true
The real interest rate will be lower than the nominal interest rate
Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?
unemployed persons falsely report themselves to be actively looking for a job
If the federal government implements programs so that the unemployed are more quickly matched with jobs, then
the natural rate of unemployment will decrease.
Which of the following statements is true about the U.S. economy?
Each year, many new jobs are created and many existing jobs are destroyed.
The labor force participation rate equals the
(labor force divided by working-age population) × 100.
The consumer price index is the
average of the prices of the goods and services purchased by a typical urban family of four.
If you have trouble finding a job because of a slowdown in the overall economy, we would say that you are
cyclically unemployed.
If an economy experiences deflation, the real interest rate
will be greater than the nominal interest rate