Chapters 6-10

Question 1

price level

Answer 1

a weighted average of the prices of all goods and services

Question 2

price index

Answer 2

a measure of the price level

Question 3

Consumer Price Index (CPI)

Answer 3

the weighted average of prices of a specific set of goods and service purchased by a typical household; a widely cited index number for the price level

Question 4

what 8 categories of goods and services does the market basket include?

Answer 4

(1) food and beverages, (2) housing, (3) apparel, (4) transportation, (5) medical care, (6) recreation, (7) education and communication, and (8) other goods and services

Question 5

base year

Answer 5

the year chosen as a point of reference or basis of comparison for prices in other years; a benchmark year

Question 6

inflation

Answer 6

an increase in the price level; usually measured on an annual basis

Question 7

real income

Answer 7

nominal income adjusted for price changes

Question 8

nominal income

Answer 8

the current dollar amount of a person’s income

Question 9

what two groups can the population of the US be divided into?

Answer 9

(1) persons under 16, persons in the armed forces or persons institutionalized and (2) the civilian noninstitutional population

Question 10

what is the civilian noninstitutional population?

Answer 10

persons either in the civilian labor force or not in the labor force

Question 11

what does it mean to be “not in the labor force”?

Answer 11

a person is neither working nor looking for work; i.e. retired people, people who engage in own-home housework or those who choose not to work

Question 12

what does it mean to be in the labor force?

Answer 12

that you are either unemployed or employed

Question 13

unemployment rate

Answer 13

the percentage of the civilian force that is unemployed; unemployment rate = number of unemployed persons/civilian labor force

Question 14

employment rate

Answer 14

number of employed persons/ civilian noninstitutional population

Question 15

labor force participation rate

Answer 15

civilian labor force/civilian noninstituional population

Question 16

what are the four reasons for unemployment?

Answer 16

job loser, job leaver, reentratn, new entrant

Question 17

what does it mean to be a discouraged worker? how does this figure skew the fix on the real unemployment problem in society?

Answer 17

a discouraged worker is a person who was fired from a job and isn’t actively looking for another job like an unemployed person might. discouraged workers are not counted in the unemployment rate.

Question 18

frictional unemployment

Answer 18

unemployment due to natural frictions in the economy and that is caused by changing market conditions. represented by qualified individuals with transferable skills who change jobs.

Question 19

structural unemployment

Answer 19

unemployment due to structural