Chapter 8

Question 1

Employment

Answer 1

total # of people in economy aged 15 or older working full or part time

Question 2

Employment rate equation

Answer 2

(#of employed/ population 15 years or older)x100

Question 3

Unemployment criteria (3)

Answer 3

1. Does not currently have paid job
2. Available for work and 15 years of age
3. actively looking for job in past 4 weeks

Question 4

unemployment

Answer 4

total number of available people aged 15 or older are currently not employed and are looking for work

Question 5

unemployment rate

Answer 5

percent of the total number of people in labour force unemployed

Question 6

unemployment rate equation

Answer 6

(#of unemployed workers/labour force)x100

Question 7

what 2 things make up the Labor Force

Answer 7

sum of employment plus and unemployment

Question 8

Labor Force participation rate

Answer 8

percentage of population aged 15 or older in labour force

Question 9

labor force participation rate equation

Answer 9

(labor force/population aged 15 older)x100

Question 10

Does unemployment still rise even after a recession

Answer 10

yes because economy doesn’t recover instantly

Question 11

Pros of Unemployment rate graph

Answer 11

good indicator of likelihood to find a job

Question 12

cons of unemployment rate graph

Answer 12

overstates and understates true level of unemployment

Question 13

unemployment graph overstates example

Answer 13

normal to take time finding a job but when jobs are high, people refuse positions

Question 14

unemployment graph understates examples (3)

Answer 14

1. Discouraged worker
2. marginally attached worker
3. underemployed

Question 15

Discouraged workers

Answer 15

those given up looking for work because they have little to no chance

Question 16

Marginally attached worker

Answer 16

like to be employed, stopped looking for more then 4weeks, may be waiting for employment to begin

Question 17

underemployed

Answer 17

people who work part-time, or do not maximize skills in current job

Question 18

Job search

Answer 18

workers looking for employment

Question 19

Unemployment graph- recession and expansion

Answer 19

rise during recession, fall during expansion

Question 20

Jobless recovery

Answer 20

period where Real GDP growth rate is positive but underemployment rate is rising

Question 21

Can unemployment ever reach 0%

Answer 21

NO

Question 22

Natural Unemployment

Answer 22

unemployment that occurs naturally

Frictional + Structural unemployment

Question 23

Actual Unemployment

Answer 23

natural unemployment + cyclical unemployment

Question 24

Frictional Unemployment

Answer 24

unemployment due to time workers spend in job search

Question 25

Frictional Unemployment Determinants (3)

Answer 25

Scarcity of Information No jobs available no matches/refused offers

Question 26

Structural Unemployment (5)

Answer 26

Caused by changes in labour demand, improve technology, lack of skills, live far away, unwilling to work at wage offer

Question 27

structural unemployment determinants (5)

Answer 27

labour unions, minimum wages, efficient wages, government policies, skill mismatches

Question 28

cyclical unemployment

Answer 28

deviation from the natural rate due to business cycles

Question 29

NAIRU?

Answer 29

non-accelerating inflation rate of unemployment

Question 30

why is natural rate of unemployment not constant (3)

Answer 30

changes in characteristics of 1. labor force characteristics 2. labor marketing institutions 3. government policies

Question 31

labor force characteristics

Answer 31

demographic changes ex age, sex,

Question 32

labor marketing institutions

Answer 32

unions, temp agencies, technology

Question 33

government policies

Answer 33

employment subsidies, insurance, minimum wage

Question 34

real wage

Answer 34

wage rate divided by price level

Question 35

real income

Answer 35

income divided by price level

Question 36

inflation rate equation

Answer 36

((PI year 2 - PI year 1)/PI year 1))x100

Question 37

Cost of Inflation (3)

Answer 37

Shoe leather Menu Cost Unit of Account costs

Question 38

Shoe Leather Costs

Answer 38

increased cause of transactions, money loses value so we spend

Question 39

Menu Cost

Answer 39

real cost of changing listed price

Question 40

Unit of Account costs

Answer 40

cost arising from the way inflation makes money a less reliable unit of measurement

Question 41

Interest rate

Answer 41

price that a lender charges for the use of their savings/items for a year

Question 42

Nominal Interest Rate and example

Answer 42

interest rate expressed in dollar terms ex interest on student loans

Question 43

real interest rate

Answer 43

nominal interest rate minus rate of inflation

Question 44

Indexing and example

Answer 44

way to correct effect of inflation purchasing power by adjusting dollar value of item to inflation rate ex income decrease, price decrease

Question 45

higher than expected inflation rate is good for

Answer 45

borrowers and bad for lenders, because they repay loans with funds that have a lower real value than had been expected

Question 46

lower than expected inflation rate is good for

Answer 46

lenders and bad for borrowers, borrowers repay loan with funds that have a higher real value then had been expected

Question 47

Disinflation

Answer 47

process of bringing down inflation rate