Chapter 5: Monitoring Jobs and Inflation Flashcards
What is the Labour Force Survey?
A survey conducted by Statistics Canada to track the state of the nation’s labour market.
What is the working-age population?
The total number of people aged 15 years and over.
How is the working-age population divided?
Into two groups: those in the labour force and those not in the labour force.
What are the two groups in the labour force?
Employed and unemployed.
Define ‘employed’.
A person who has either a full-time job or a part-time job.
What are the criteria for being classified as unemployed?
- Without work but has made specific efforts to find a job within the previous four weeks.
- Waiting to be called back to a job from which laid off.
- Waiting to start a new job within four weeks.
What are the four labour market indicators calculated by Statistics Canada?
- Unemployment rate
- Involuntary part-time rate
- Labour force participation rate
- Employment rate
How is the unemployment rate calculated?
Unemployment rate = (Number of people unemployed ÷ Labour force) x 100
What happens to the unemployment rate during recessions and expansions?
It increases in recessions and decreases in expansions.
What is the involuntary part-time rate?
The percentage of people in the labour force who have part-time jobs and want full-time jobs.
How is the labour force participation rate calculated?
Labour force participation rate = (Labour force ÷ Working-age population) x 100
What does the employment rate represent?
The percentage of the working-age population who have jobs.
How is the employment rate calculated?
Employment rate = (Number of people employed ÷ Working-age population) x 100
What trend occurred in the labour force participation rate and employment rate before 1990?
Both increased rapidly.
What accounts for the upward trends in the labour force participation rate and employment rate?
Mainly the increasing participation of women in the labour market.
What three types of underemployed labour are excluded from the official unemployment measure?
- Discouraged searchers
- Long-term future starts
- Involuntary part-timers
Define ‘discouraged searcher’.
A person who is neither working nor looking for a job but wants and is available for a job and has looked for work recently.
What is a ‘long-term future start’?
Someone who will start a job more than four weeks in the future.
Define ‘involuntary part-timer’.
Someone working part time because they cannot find full-time employment.
What are the three types of unemployment?
- Frictional
- Structural
- Cyclical
What is frictional unemployment?
Unemployment that arises from normal labour market turnover.
What causes structural unemployment?
Changes in technology or international competition that change the skills needed for jobs or the locations of jobs.
What is cyclical unemployment?
Unemployment that fluctuates over the business cycle.
What is full employment?
Occurs when there is no cyclical unemployment, meaning all unemployment is frictional and structural.
What is the natural rate of unemployment?
The unemployment rate at full employment.
What is potential GDP?
The quantity of real GDP at full employment.
What happens to real GDP and the unemployment rate at full employment?
Unemployment rate equals the natural rate of unemployment and real GDP equals potential GDP.
What occurs when the unemployment rate is less than the natural rate of unemployment?
Real GDP is greater than potential GDP.
What occurs when the unemployment rate is greater than the natural rate of unemployment?
Real GDP is less than potential GDP.
What is the Consumer Price Index (CPI)?
A measure of the average prices paid by urban consumers for a fixed basket of consumer goods and services.
What is the base period in relation to the CPI?
The period defined to equal 100 for CPI calculations.
What are the three stages of constructing the CPI?
- Selecting the CPI basket
- Conducting the monthly price survey
- Calculating the CPI
What is the formula for calculating the CPI?
CPI = (Cost of CPI basket at current period prices ÷ Cost of CPI basket at base period prices) × 100
How is the inflation rate calculated?
Inflation rate = [(CPI this year – CPI last year) ÷ CPI last year] x 100
What are the main sources of bias in the CPI?
- New goods bias
- Quality change bias
- Commodity substitution bias
- Outlet substitution bias
What are the consequences of bias in the CPI?
- Distorts private contracts
- Increases government outlays
- Biases estimates of real earnings
What is the GDP deflator?
An index of the prices of all items included in GDP, the ratio of nominal GDP to real GDP.
What is the chained price index for consumption?
An index of the prices of all items included in consumption expenditure in GDP, the ratio of nominal consumption expenditure to real consumption expenditure.
