Chapter 6: Inflation And Unemployment

Question 1

Inflation rate

Answer 1

Annual percentage change in the price level (CPI)

%Change = N2-N1/N1 *100%

Question 2

Consumer Price Index (CPI)

Answer 2

A measure of the average of the prices paid by urban consumers for a fixed basket of consumer goods and services

Question 3

Calculate CPI

Answer 3

1) calculate the cost of CPI basket in base year
2) calculate cost CPI in current period
3) Calculate CPI for current period
CPI = cost of CPI basket in current year/cost of CPI in the base year

Question 4

Working-age population

Answer 4

The total number of people age 16 years and over who are not in jail, hospital, or some other institutional care

Question 5

Unemployment Rate

Answer 5

Unemployment rate = labor force/working-age population x 100%

Question 6

Labor Force Participation Rate

Answer 6

Labor force/working-age population x 100%

Question 7

Employment-to-population ratio

Answer 7

of people employed/working-age population x 100%

Question 8

Economic growth in the short run

Answer 8

%Change Real GDP

Question 9

Growth rate of real GDP per person

Answer 9

Real GDP per person = Real GDP/Population

Question 10

Economic growth in the long run

Answer 10

Potential GDP - when all factors of production are fully employed

Question 11

The aggregate production function

Answer 11

Is the relationship between real GDP changes and the quantity of labor when all other influences on production remain the same

Question 12

Macroeconomic Objectives

Answer 12

HIGH Economic Growth
LOW Inflation
LOW Unemployment