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Econ Quiz 2 Study

Terms in this set (18)

If the number of unemployed equals 20,000, the number of employed equals 60,000, and the working age population is 300,000, then calculate the following?

(A) Labor force participation rate =

(B) Unemployment rate =
26.67%
Now, Labor force = Number of people employed + Number of people unemployed = 60,000 + 20,000 = 80,000 Therefore, Labor force participation rate =
80,000/300,000x100%

25%
Now, Labor force = Number of people employed + Number of people unemployed = 60,000 + 20,000 = 80,000 Therefore, Unemployment rate =
20,000/80,000x100%
Because of the current recession Bill was fired from his job. This is an example of _____________ Unemployment
cyclical
You were working as an insurance agent last year. You didn't like your job that much. You recently quit your job and start looking for another job. This is an example of _____________ unemployment.
frictional
If Eastman Chemicals decides to relocate its operations from Kingsport, TN to Cleveland, OH then this will lead to ____________ unemployment.
Structural
When unemployment rate is less than natural unemployment rate, then real GDP is _______ than potential GDP
More
When we have full employment, is unemployment rate equal to zero?
Full employment doesn't mean unemployment rate is zero. NO!
The monthly market basket for consumers consists of pizza, t-shirts, and rent. The table below shows market basket quantities and prices for the items in 2013 and 2014. The reference base year is 2013. Calculate the CPI for 2014.
$110.57

Expenditures in 2013 = 20 x $3.50 + 2 x $20.00 + 1 x $350.00 = $460

Expenditures in 2014 = 20 x $4.38 + 2 x $18.00 + 1 x $385.00 = $508.6

508.6/460x100= 110.57
In 1973, the price of a Big Mac was $0.50. The CPI in 1973 was 44.4 while the CPI in 2006 was 201.6. Calculate the equivalent price of a Big Mac in 2006 dollars.
$2.27

(YearBDollarAmount/YearADollarAmount)=(CpiYearB/CpiYearA)

You are trying to find the price of Big Mac in 2006. So the year 2006 is year B and 1973 is year A. The question tells you Year A dollar amount is $0.50, CPI of Year A (1973) is 44.4 and CPI of Year B (2006) is 201.6. Putting these values in the formula.

x/.5=201.6/44.4
x=(201.6/44.4)*.5
In 2011, nominal GDP was $13,295 billion and real GDP was $11,519 billion. Given the information calculate the GDP deflator for 2011.
$115.42

13295/11519x100
Congratulations! Your boss has given you a raise. However, you want to know whether your purchasing power has actually increased, since price level as indicated by the CPI has risen as well. The table below gives you data for wages and the Consumer Price Index (CPI) for this year and last year. (12 points)

A.) Based on what you learnt in Econ 2210, you decide to calculate real wages for the two years. Real wage last year was $______________

B.) Based on your calculations above, you conclude that your purchasing power this year has actually_________________
1000

Decreased

1750/175x100
Your bank paid 3% interest on $1,000 deposited in your savings account. The inflation rate during the year was 4%. (4 points)

A.) Calculate the real interest rate that you earned on the deposit.

B) Based on your calculations above, you ____ in this case.
-1%

Lost

3%-4%=-1%
In 2009 the CPI was 207 while the CPI in 2013 was 225. What is the inflation rate between 2009 and 2013? Show your calculations.
8.7%

(225-207)/(207)x100
A decrease in interest rates will lead to an ___________ in the quantity of loanable funds demanded for investment.
increase

Lower interest rate means that now it is cheaper for firms to borrow funds for investment in capital goods in their business.
A decrease in income will lead to a _____________ in saving by households.
Decrease

Less income implies less after-tax or disposable income for households which they can now distribute between consumption and saving. If income falls then this will reduce both the amount of consumption spending and saving that households will have.
) An increase in corporate taxes will lead to a ___________ in investment by firms.
Decrease

An increase in corporate taxes will reduce the profit opportunities of firms and hence they will tend to reduce their investment in the business
If the government has a budget deficit, this will lead to a ____________ in the national saving.
decrease
As a result the total level of investment in the economy will _________________
decrease
This phenomenon is called
Crowding out
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