Econ Chapter 13 Notes (PT. 2)

Question 1

Measuring Unemployment?

Answer 1

• Does not include people who have stopped looking for work (Discouraged workers)
• Also does not include people working for family businesses without pay
• Estimate can be difficult to measure, especially about underground economy (illegal activities)
• Full Employment: 5% or less unemployment

Question 2

Inflation?

Answer 2

When prices go up; decreases purchasing power

Question 3

Measures of Inflation?

Answer 3

• Consumer Price Index (CPI): Inflation Rate
• Bureau of Labor Statistics measures of change in price of market basket of hundreds of items (monthly)

Question 4

Causes of Inflation? (List 3)

Answer 4

• Demand-Pull
• Cost-Push
• Excessive Monetary Growth

Question 5

Demand-Pull?

Answer 5

All sectors of the economy try to buy more than is produced

Question 6

Cost-Push?

Answer 6

Where price of inputs (like oil or labor) increase, producers raise price to keep profits

Question 7

Excessive Monetary Growth?

Answer 7

When money supply grows faster than Real GDP

Question 8

Wage Price Spiral?

Answer 8

• Begins when workers ask for a higher price
• More spending leads to higher prices
• Workers ask for a higher price
• And so on . . .