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ECON 203 Pakhotina > Exam 2 Chapter 9 & 10 > Flashcards

Exam 2 Chapter 9 & 10 Flashcards

1
Q

How do you find the Working Age Population?

A

Total Population MINUS

  • Young (less than 16 years old)
  • Military
  • Institutionalized (people in prison/mental hospitals)

= Working-Age Population

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2
Q

Labor Force + Not in Labor Force = ___

A

Working-Age Population

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3
Q

___ is the working-age people who are either employed or unemployed.

A

Labor Force

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4
Q

How do you calculate the Labor Force?

A

Employed + Unemployed

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5
Q

What 3 things constitute a person as Employed?

A
  • people who worked 1 hour or more as a paid employee
  • people who worked 15 hours or more as unpaid employee for family business
  • temporary absent (sick, vacation, maternity leave)
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6
Q

What are the 3 things the Bureau of Labor Statistics defines a person as unemployed?

A
  • Persons 16 years or older who had no employment during the survey (reference) week
  • People who were available for work but didn’t (temporary illnesses preventing someone from work are NOT counted as unemployed)
  • People who made specific efforts to find employment sometime during the 4-week period ending with the reference week
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7
Q

___ is a situation where someone wants to work but cannot find a job in the current market.

A

Unemployment

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8
Q

People who do not have jobs and who are not actively looking for work, or are not available for work are counted as ___

A

Not in the Labor Force

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9
Q

What are the 5 things that constitutes a person as not in the labor force?

A
  • Homemakers
  • Full-time Students
  • Retirees who cannot work or choose not to work
  • Those who cannot work because of a disability
  • Those who choose not to work
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10
Q

How do you calculate the Unemployment Rate?

A

(Unemployed / Labor Force) x 100

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11
Q

How do you calculate Labor-force participation Rate (LFPR)?

A

(Labor Force / Working-age Population) x 100

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12
Q

What does the Labor-force participation Rate show you?

A

how many people of the population want to be working

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13
Q

What happens to the Labor-force participation rate (LFPR) during a recession?

A

Usually falls

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14
Q

What are two limitations of the Unemployment rate?

A

DOESN’T Show:

  • Marginally Attached Workers
    • discouraged workers (subset of Marginally Attached Workers)
  • Underemployed Workers
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15
Q

Explain a Marginally Attached Worker

A
  • are available for work
  • have been looking for work in the past 12 months
  • have NOT been looking for work in the past 4 weeks

*Are NOT counted in the labor force

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16
Q

Difference between a Marginally Attached Worker and a Discouraged Worker?

A

Marginally Attached Worker

  • has been looking for work in the past 12 months
  • has NOT been looking for work in the past 4 weeks

Discouraged Worker
-has NOT been looking for work because they believe they are no jobs available

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17
Q

Explain an Underemployed Worker

A
  • Someone who is working less hours than they want to

- Someone who is working a job that requires less skill than what they are capable of doing

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18
Q

The unemployment rate may ___ the effect of the recession.

A

understate

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19
Q

___ is bought and sold in a market, just like other goods and services.

A

Labor

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20
Q

When the labor market is in equilibrium, there is no ___

A

Unemployment

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21
Q

What happens when the wage rate is higher than the equilibrium wage in the labor market?

A
  • causes Surplus of labor
  • Labor Supplied > Labor Demanded
  • Causes Unemployment
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22
Q

True or False:

It is possible for the Unemployment Rate to reach a value of zero.

A

False

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23
Q

What are the two categories of Unemployment?

A

Natural Unemployment

Cyclical Unemployment

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24
Q

Unemployment that persists in an economy in the long run is called ___

A

Natural Unemployment

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25
Q

Unemployment caused by short-term economics fluctuations (phases of business cycle) is called ___

A

Cyclical Unemployment

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26
Q

What are the 3 things that Natural Unemployment includes?

A
  • Frictional Unemployment
  • Structural Unemployment
  • Real-wage or Classical Unemployment
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27
Q

___ is caused by workers who are changing location, job, or career.

A

Frictional Unemployment

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28
Q

___ is caused by a mismatch between the skills workers can offer and the skills in demand.

A

Structural Unemployment

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29
Q

What are 3 things that cause Structural Unemployment?

A
  • Technological Changes
  • Change is Taste
  • Reallocation of jobs (Ex: U.S. factory moves it’s business to China)
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30
Q

___ results from wages being higher than the market-clearing level.

A

Real-wage or Classical Unemployment

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31
Q

What are 3 things that can cause Real-wage or Classical Unemployment?

A
  • Effective Wage
  • Minimum Wage
  • Unions and Bargaining
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32
Q

What are the PROs and CONs of Minimum Wage?

A

PROs
-provides basic standards of living

CONS

  • minimum wage is just above poverty line causes unemployment
  • creation of illegal jobs (hiring undocumented migrants at below-minimum wage or paying workers cash without reporting it)
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33
Q

How does the power of Labor Unions compare between the 1950s and present day?

A

Labor Union power is falling

1950s
-1/3 workers were unionized

Present Day
-12% workers are unionized with half of them working for government enterprises

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34
Q

Wages deliberately set above the market rate to increase productivity are called ___

A

Efficiency Wages

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35
Q

What are two reasons for using efficiency wages?

A
  • Reduce turnover ratio

- Make employee more interested in keeping the job so they will work harder

36
Q

What happens to the demand for labor during a recession?

A

It Decreases

37
Q

Why doesn’t the labor market come to a new equilibrium at a lower wage price during a recession?

A

Real world wages are “Sticky” (slow to respond to economic shifts)

38
Q

What are 3 things that cause wages to be sticky?

A
  • Minimum Wage, Effective Wage, Unions
  • Employers prefer to lay-off workers rather than cut wages (creates discouraged workers)
  • Wages are often on contracts and can’t be changed until their end date
39
Q

What is the effect of a recession on Frictional unemployment (Natural Unemployment)?

A

Ambiguous (may increase/decrease)

  • Workers could retire early
  • More people could go to college and stay in college later
40
Q

What is the effect of a recession on Structural unemployment (Natural Unemployment)?

A

Short Term
-No Effect

Long-Term
-Increases unemployment
Because skills of the long-term unemployed deteriorate
Because some jobs move overseas during recession and never come back

41
Q

What are 2 factors that affect unemployment?

A

Government Policies

  • minimum wage
  • Unemployment insurance
  • Taxes and worker rights
  • Professional training programs
  • Government-run unemployment agencies

Job Searching Technologies

42
Q

___ is money paid by the government to people who are unemployed.

A

Unemployment Insurance

43
Q

What type of unemployment does Unemployment Insurance affect?

A

Frictional Unemployment

44
Q

As Unemployment insurance increases, how is Frictional Unemployment affected?

A

Frictional Unemployment increases

45
Q

Lowering taxes on wage ___ the unemployment rate

A

Decreases

46
Q

How does new technologies, like the invention of the internet affect Frictional Unemployment?

A

Decreases Frictional Unemployment

-makes it easier to find jobs

47
Q

A country with high Workers’ Rights has a ___ number of unemployed compared to a country with low Workers’ Rights

A

Greater

48
Q

A country with low Workers’ Rights has a ___ number of unemployed compared to a country with high Workers’ Rights

A

Low

49
Q

The main source of information on unemployment in the U.S. is a household survey called the ___, conducted by the BLS.

A

Current Population Survey (CPS)

50
Q

What is the effect of the nominal GDP growing faster than prices and population combined in the past 50 years?

A

Purchasing power of avg person increased significantly

51
Q

Increase in these 3 things can be defined as Growth

A
  • nominal GDP
  • real GDP
  • real GDP per capita
52
Q

How do you find the Real GDP per capita growth rate using “real GDP per capita”?

A

[(real GDP per capita current yr - real GDP per capita previous yr) / real GDP per capita previous year] x 100

53
Q

How do you find the Real GDP per capita growth rate not using “real GDP per capita”

A

nominal GDP growth rate - inflation rate - population growth rate

54
Q

Economic growth builds on itself overtime due to ___

A

Compound Interest

55
Q

What is the Rule of 70 used to find?

A

How many years until the income doubles

56
Q

What is the GDP per capita compounding formula?

A

GDP year A = GDP yr B x [(1+ real GDP growth Rate) / 100]^(YrA - YrB)

57
Q

___ is a measure of the output per worker and is what drives growth.

A

Productivity

58
Q

output per worker =___

A

GDP per capita

59
Q

What are the 4 categories of Productivity?

A
  • Physical Capital
  • Human Capital
  • Technology improvements
  • Natural Resources
60
Q

___ is the stock of equipment and structures used to produce goods and services.

A

Physical capital

61
Q

Give 4 examples of Physical Capital

A
  • Factories
  • Cell phone towers
  • Machines

And Investing

62
Q

Capital investments are a part of ___

A

Physical Capital

63
Q

Under investment/savings of Physical Capital, savings come from these two places.

A
  • Within a country

- Abroad

64
Q

What are the two sources that Domestic Savings come from?

A
  • When households spend less than they earn

- Government revenues exceed non-capital expenditures

65
Q

Explain the investment trade-off

A

An increase in savings means a decrease in today’s consumption

66
Q

consumption + savings = ___

A

Income

67
Q

Which countries save more, developing or developed nations?

A

Developed Nations save less

Developing Nations save more

68
Q

What are the two sources that government investments come from?

A
  • Borrowing

- Tax Revenue

69
Q

___ is when a firm runs part of its operation abroad or invests in another company abroad.

A

Foreign Direct Investment

70
Q

___ is investment funded by foreign sources that is operated domestically.

A

Foreign Portfolio Investment

71
Q

Give 2 examples of a Foreign Portfolio Investment

A

Foreign investors buy

  • U.S. Stocks
  • U.S. Bonds
72
Q

Why are foreign investments especially important for low-income countries?

A
  • because they don’t have a lot of domestic savings

- transfer of technology and human capital

73
Q

___ is the set of skills, knowledge, experience, and talent that determine the productivity of workers.

A

Human Capital

74
Q

What are two things that increase human capital?

A

Education and Health

75
Q

___ are innovations that cause the same inputs to produce more outputs.

A

Technological improvements

76
Q

___ are production inputs that come from the earth.

A

Natural Resources

77
Q

What is this formula used for?

gY = gA + α gK + (1 - α)gL

A

To measure the growth rate of the economy

78
Q

Explain what each variable in the formula represents:

gY = gA + α gK + (1 - α)gL

A

α - the share of GDP (Y) distributed to owners of capital.
(1 – α) - the share of GDP (Y) distributed to laborers.
gK - growth rate of capital.
gL - growth rate of labor.
gY - growth rate of GDP.

gA – shows how much of GDP growth can be attributed to the technological change.

79
Q

What years was the economy in stagnation?

A

1960s - 1980s

80
Q

Explain the Juggling Act

A

Says there are trade-offs associated with promoting economic growth

81
Q

Under the Juggling Act

The poorer the country, the harder the ___

A

trade-off

82
Q

This ___ is one of the main justifications for foreign aid that provides loans or funding for investment and development

A

Poverty Trap

83
Q

Which economic growth theory states that as physical capital increases, the resulting increase in GDP gets smaller and smaller

A

Diminishing marginal returns

84
Q

The ___ is when at some point during capital accumulation, the economy reaches a “steady state”, and then stagnates

A

Catch-up effect

85
Q

The ___ says that poor countries will grow faster than rich ones, until they “catch up” and all countries “converge” to the same growth rate and income level

A

Absolute convergence (catch-up) effect

86
Q

What are the two things that Endogenous Growth Models focus on?

A
  • Technological Improvements

- Physical Capital

87
Q

___ states that the standards of living will converge only within groups of countries having similar characteristics.

A

Conditional Convergance

ECON 203 Pakhotina (6 decks)

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