Chapter 6

Question 1

Unemployed

Answer 1

individuals who do not currently have a job and are actively looking for one

Question 2

Employed

Answer 2

Individuals who currently have jobs

Question 3

Labor force

Answer 3

Labor force = employed + unemployed

Question 4

Unemployment rate

Answer 4

the number of unemployed divided by the total labor force

Question 5

Labor force participation

Answer 5

the labor force divided by the popular 16 years of age and older

Question 6

Discouraged Workers

Answer 6

workers who left the labor force because they could not find jobs

Question 7

Marginally attached Workers

Answer 7

individuals who would like to work and have searched for work in the recent past, but have stopped looking for work for a variety of reasons; discouraged workers and workers who are not looking for jobs

Question 8

Individuals working part time for economic reasons

Answer 8

works who would like to be employed full time but hold part-time jobs

Question 9

Seasonal Unemployment

Answer 9

unemployment due to recurring calendar effects

Question 10

Cyclical Unemployment

Answer 10

unemployment that occurs during fluctuations in real GDP

Question 11

Frictional Unemployment

Answer 11

unemployment that occurs with the normal workings of the economy, such as workers taking time to search for suitable jobs and firms taking time to search for qualified employees

Question 12

Structural Unemployment

Answer 12

Unemployment that occurs when there is a mismatch of skills of jobs

Question 13

Natural rate of unemployment

Answer 13

the level of unemployment at which there is no cyclical unemployment. It consists of only frictional and structural unemployment.

Question 14

Full employment

Answer 14

the level of unemployment that occurs when the unemployment rate is at the natural rate

Question 15

Unemployment insurance

Answer 15

payments unemployed people receive from the government

Question 16

Consumer Price Index (CPI)

Answer 16

A price index that measures the cost of a fixed basket of goods chosen to represent the consumption pattern of a typical consumer

Question 17

Problems in Measuring Changes in Price

Answer 17

1. All indexes in reality overstate the actual changes in prices
2. Government statisticians try to adjust for quality changes
3. Cost-of-living adjustments (COLAs)

Question 18

Cost-of-Living Adjustments

Answer 18

Automatic increases in wages or other payments that are tied to the CPI

Question 19

Inflation Rate

Answer 19

percentage rate of change of a price index

Question 20

Anticipated Inflation

Answer 20

inflation that is expected

Question 21

Menu costs

Answer 21

the costs associated with changing prices and printing new price lists when there is inflation

Question 22

Shoe-Leather Costs

Answer 22

costs of inflation that arise from trying to reduce holdings of cash

Question 23

Unanticipated Inflation

Answer 23

inflation that is unexpected

Question 24

Hyperinflation

Answer 24

an inflation rate exceeding 50% per month