Chapter 6

Question 1

Who are the unemployed?

Answer 1

• Individuals who don’t have a job and are actively looking for work.

Question 2

Labor force.

Answer 2

• Employed + unemployed.

Question 3

Unemployment rate.

Answer 3

• (unemployed / labor force) x 100.

Question 4

Labor force participation rate.

Answer 4

• (Labor force / pop. 16 years and older) x 100. Pop excluding those in the military.

Question 5

Discouraged workers.

Answer 5

• Left the labor force bc. they couldn’t find a job.

Question 6

Marginally attached workers.

Answer 6

• Those who aren’t working as much as they’d like to for reasons.

Question 7

Part time for economic reasons.

Answer 7

• Hardships for example might cause family members otherwise not in the labor force to get part time jobs.

Question 8

Seasonal unemployment.

Answer 8

• Component of unemployment attributed to seasonal factors.

Question 9

Cyclical unemployment.

Answer 9

• Fluctuations in real GDP that cause unemployment.

Question 10

Frictional unemployment.

Answer 10

• Occurs as a result of normal economy behavior; normal behavior of firms waiting for qualified workers and workers looking for the best job offer.

Question 11

Structural unemployment.

Answer 11

• A result of a mismatch of skills and jobs. This occurs for only specific parts of the economy that could occur from automation for example.

Question 12

Natural rate of unemployment.

Answer 12

• Level of unemployment independent of cyclical unemployment; only measures frictional and structural unemployment.

Question 13

Full employment.

Answer 13

• When unemployment is at the natural rate.

Question 14

Unemployment insurance.

Answer 14

• People receive payments from gov’t. 70% of people did not remain on unemployment insurance longer than 6 months.

Question 15

Consumer price index.

Answer 15

• Price index that measures the cost of a fixed basket of goods chosen to reflect the consumption pattern of a typical consumer.

Question 16

How would CPI in a year be calculated?

Answer 16

• CPI in yr k = 100 x cost of basket in yr k / cost of basket in base year.
• Measures inflation.

Question 17

Cost of living adjustments.

Answer 17

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

Question 18

Inflation rate.

Answer 18

• % rate of change of a price index.

Question 19

Deflation.

Answer 19

• Negative inflation or falling prices of goods and services.

Question 20

Anticipated inflation vs. unanticipated inflation.

Answer 20

• Anticipated inflation: inflation that is expected.

* Unanticipated inflation: inflation that is not expected; result of disasters, wars, bubbles, etc.

Question 21

Menu cost.

Answer 21

• Costs associated with changing prices and printing new price lists (inflation).

Question 22

Shoe-leather cost.

Answer 22

• Costs of inflation that arise from trying to reduce holdings of cash.

Question 23

Hyperinflation.

Answer 23

• An inflation rate > 50% per month.