Chapter 7

Question 0

Labor force

Answer 0

Individuals aged 16 or older who either have jobs or who are looking and available for jobs; the number of employed plus the number of unemployed

Question 1

Unemployment

Answer 1

The total number if adults (aged 16 years or older) who are willing and able to work and who are actively looking for work but have not found a job

Question 2

Stock

Answer 2

The quantity if something, measured at a given point in time-for example, an inventory of goods or a bank account. Stocks are defined independently of time, although they are assessed at a point in time.

Question 3

Flow

Answer 3

A quantity measured per unit of time; something that occurs over time, such as the income you make per week or per year or the number of individuals who are fired every month.

Question 4

Job loser

Answer 4

An individual in the labor force whose employment was involuntarily terminated

Question 5

Re entrant

Answer 5

An individual who used to work full time but left the labor force and has now re entered it looking for a job

Question 6

Job leaver

Answer 6

An individual in the labor force who quits voluntarily

Question 7

New entrant

Answer 7

An individual who has never held a full time job lasting two weeks or longer but is now seeking employment

Question 8

Discouraged workers

Answer 8

Individuals who have stopped looking for a job because they are convinced that they will not find a suitable one

Question 9

Labor force participation rate

Answer 9

The percentage of noninstitutionalized working-age individuals who are employed or seeking employment

Question 10

Frictional unemployment

Answer 10

Unemployment due to the fact that workers must search for appropriate job offers. This takes time, and so they remain temporarily unemployed

Question 11

Structural unemployment

Answer 11

Unemployment resulting from a poor match of workers’ abilities and skills with current requirements of employers

Question 12

Cyclical unemployment

Answer 12

Unemployment resulting from business recessions that occur when aggregate (total) demand is insufficient to creat full employment

Question 13

Seasonal unemployment

Answer 13

Unemployment resulting from the seasonal pattern of work in specific industries. It is usually due to seasonal fluctuations in demand or to changing weather conditions, rendering work difficult, if not impossible, as in the agriculture, construction, and tourist industries

Question 14

Full employment

Answer 14

An arbitrary level of unemployment that corresponds to “normal” friction in the labor market. In 1986, a 6.5 percent rate of unemployment was considered full employment. Today, it is assumed to be around 5 percent

Question 15

Natural rate of unemployment

Answer 15

The rate of unemployment that is estimated to prevail in long-run macroeconomic equilibrium, when all workers and employers have fully adjusted to any changes in the economy

Question 16

Inflation

Answer 16

A sustained increase in the average of all prices of goods and services in an economy

Question 17

Deflation

Answer 17

A sustained decrease in the average of all prices of goods and services in an economy

Question 18

Purchasing power

Answer 18

The value of money for buying goods and services. If your money income stays the same but the price of one good that you are buying goes up, your effective purchasing power falls, and vice versa

Question 19

Price index

Answer 19

The cost of today’s market basket of goods expressed as a percentage of the cost of the same market basket during a base year

Question 20

Base year

Answer 20

The year that is chosen as the point of reference for comparison of prices in other years

Question 21

Consumer price index (CPI)

Answer 21

A statistical measure of a weighted average of prices of a specified set of goods and services purchased by typical consumers in urban areas

Question 22

Producer price index (PPI)

Answer 22

A statistical measure of a weighted average of prices of a specified set of goods and services purchased by typical consumers in urban areas

Question 23

GDP deflator

Answer 23

A price index measuring the changes in prices of all new goods and services produced in the economy

Question 24

Personal Consumption Expenditure (PCE) Index

Answer 24

A statistical measure of average prices that uses annually update weights based on surveys of consumer spending

Question 25

Anticipated inflation

Answer 25

The inflation rate that we believe will occur; when it does, we are in a situation of fully anticipated inflation

Question 26

Unanticipated inflation

Answer 26

Inflation at a rate that comes as a surprise, either higher or lower than the rate anticipated

Question 27

Nominal rate of interest

Answer 27

The market of interest expressed in today’s dollars

Question 28

Real rate of interest

Answer 28

The nominal rate of interest minus the anticipated rate of inflation

Question 29

Cost-of-living adjustments (COLAs)

Answer 29

Clauses in contracts that allow for increases in specified nominal values to take account of changes in the cost of living

Question 30

Reprising or menu, cost of inflation

Answer 30

The cost associated with recalculating prices and printing new price lists when there is inflation

Question 31

Business fluctuations

Answer 31

The ups and does I business activity throughout the economy

Question 32

Expansion

Answer 32

A business fluctuation in which the pace of national economic activity is speeding up

Question 33

Contraction

Answer 33

A business fluctuation during which the pace of national economic activity is slowing down

Question 34

Recession

Answer 34

A period of time during which the rate of growth of business activity is consistently less than its long-term trend or is negative

Question 35

Depression

Answer 35

An extremely severe recession

Question 36

Leading indicators

Answer 36

Events that have been found to occur before changes in business activity