Chapter 5 Flashcards
unemployment rate
the percentage of people who are unemployed
number of unemployed/labour force x 100%
labour force
those who are either working or looking for work
labour force participation rate
labour force/working-age population x 100%
employment-population ratio
number of employed/working-age population x 100%
the employment rate ______ problems in the labour market
understates
frictional unemployment
short-term unemployment that arises from the process of matching workers with jobs
structural unemployment
job troubles due to a persistent mismatch between the skills or attributes of workers and the requirements of jobs
cyclical unemployment
loss of jobs due to a recession
seasonal unemployment
due to weather or demand that fluctuates with the time of year
full employment
when the only unemployment is structural and frictional
natural rate of unemployment
the necessary amount of unemployment - structural and frictional
efficiency wage
a higher-than-market wage that a firm pays to motivate workers to be more productive
consumer price index (CPI)
the average prices and amounts of goods and services that people tend to buy
CPI calculation
expenditures now/expenditures in base year x100
substitution bias
the assumption that the basket doesn’t change, when in reality it does change in response to price fluctuations
increase in quality bias
some of the price increases are due to increased quality, and NOT inflation
new product bias
the CPI product list may not be updated at times, leading to incorrect data due to the release of new items (or changes in popularity of existing items)
outlet bias
the CPI may not always reflect WHERE people buy things (ie discount stores)
producer price index (PPI)
tracks the prices that firms receive for goods and services at all stages of production
nominal variables
economic variables that are calculated in current-year prices
real variables
nominal variable/price index x 100
variables calculated in base-year prices
nominal interest rate
the interest rate stated on a loan
uses current year prices
real interest rate
nominal interest rate - inflation rate
