Exam 3

Question 1

What does a consumer price index (CPI) measure?

Answer 1

Inflation The consumer price index is a weighted average of prices of a specific set of goods and services purchased by a typical household, a widely cited index number for the price level.

Question 2

How do you calculate cpi?

Answer 2

CPI = (Total dollar expenditure current year / total dollar expenditure base year)
x 100

Question 3

How do you calculate inflation?

Answer 3

(CPI later year - CPI earlier year)
divided by earlier year
x 100

Question 4

How do you convert dollars from one year to another?

Answer 4

Salary in todays dollars =
salary earlier year x
(CPI later year / CPI earlier year)

Question 5

Describe how the BLS determines whether an individual is “employed,” “unemployed,” or “not in the labor force.”

Answer 5

The BLS takes the total population of the United States and deducts all persons who are under 16 years of old, active military, or institutionalized, and the remaining that is left is called the civilian noninstitutional population. The civilian noninstitutional population is divided into two groups: people not in the labor force and people in the labor force. People in the civilian labor force are either employed or unemployed. A person is counted as employed if they did any work for pay or profit during the survey reference week, or if they did at least 15 hours of unpaid work in a family-operated enterprise, or if they were temporarily absent from their regular jobs because of illness, vacation, bad weather, industrial dispute, or other personal factors. A person is counted as unemployed if they did not have jobs during the survey reference week but made specific active efforts to find a job during the prior 4 weeks and was available for work, or if he/she was not working, but was waiting to be called back to a job from which he/she had been temporarily laid off.

Question 6

frictional unemployment definition

Answer 6

Unemployment that is due to the national so-called frictions in the economy and that is caused by changing market conditions and represented by qualified individuals with transferable skills.

Question 7

structural unemployment definition

Answer 7

Unemployment due to structural changes in the economy that eliminate some jobs and create others for which the unemployed are unqualified.

Question 8

natural unemployment rate definition

Answer 8

Unemployment caused by frictional and structural factors in the economy.

Question 9

cyclical unemployment definition

Answer 9

The difference between the unemployment rate and the natural unemployment rate.

Question 10

How do you calculate how many people are employed?

Answer 10

Civilian labor force - amount of unemployed people

Question 11

How do you calculate employment rate?

Answer 11

number of employed persons / civilian labor force

Question 12

How do you calculate unemployment rate?

Answer 12

amount of unemployed people / civilian labor force

Question 13

define Gross Domestic Product (GDP)

Answer 13

Gross Domestic Product is the total market value of all final goods and services produced annually within a country border.

Question 14

expenditure approach to calculate GDP

Answer 14

Consumption + Investments + Government Purchases + Net Exports = GDP

Question 15

Income approach to computing GDP

Answer 15

National income + Sales tax + Depreciation + Net foreign factor income = GDP

Question 16

Computing Real GDP

Answer 16

Sum of (Base year prices x current year quantities) = Real GDP

Question 17

What is a business cycle?

Answer 17

A business cycle is recurrent swings up and down in real GDP

Question 18

What are the phase’s of a business cycle.

Answer 18

The phases are Peak, Contraction, Trough, Recovery, and Expansion

Question 19

When do we say one business cycle has occurred?

Answer 19

when it gets from the first peak to a second peak

Question 20

How do you calculate nominal GDP?

Answer 20

sum (current year prices x current year quantities)

Question 21

How do you calculate economic growth rates?

Answer 21

RealGDP (Later year - earlier year)
/ earlier year

Question 22

Discuss what productivity and standard of living mean ?

Answer 22

Productivity is the quantity of goods and services produced from each unit of labor. Standard of living depends on a countries ability to produce goods and services. Standard of living also means wealth, comfort, material goods, and necessities of certain classes in certain areas—or, more objectively, measures of income and consumption

Question 23

Explain why productivity is related to the standard of living?

Answer 23

Productivity is related to standard of living because the more productive a country is the higher the standard of living will be

Question 24

Make a list of things that determine labor productivity?

Answer 24

Things that determine labor productivity are physical capital, physical capital per worker, human capital, human capital per worker, natural resources, natural resources per worker, and technological knowledge.

Question 25

2. If a person worked at least 15 hours per week as an “unpaid” worker in a restaurant owned by her family, how is she classified by the Bureau of Labor Statistics?

A. as not in the labor force

B. as an unemployed person

C. as an employed person

D. as a discouraged worker

Answer 25

c. an unemployed person

Question 26

3. Look at the following data: Employed persons = 110 million; civilian labor force = 135 million persons; civilian non-institutional population = 190 million. The unemployment rate is __________ percent and the employment rate is __________ percent.

A. 10; 69

B. 8; 57.9

C. 18.5; 57.9

D. 18.5; 81.5

E. 12; 88

Answer 26

c. 18.5; 57.9

Question 27

4. Which of the following would definitely not be included in the measurement of GDP?

A. value of the services of a painter who paints your garage.

B. value of the services of a plumber who fixes your kitchen sink.

C. value of the services of a maid who cleans your house.

D. value of the services of a person who mows his or her own lawn.

Answer 27

d. value of services of a person who mows his or her own lawn

Question 28

A nation’s standard of living is best measured by its

A. real GDP.

B. real GDP per person.

C. nominal GDP.

D. nominal GDP per person.

Answer 28

b. real GDP per person

Question 29

not in labor force meaning?

Answer 29

person is considered “not in the labor force” if they are neither employed nor actively seeking work, meaning they are not currently working and not looking for a job; this can include individuals who are retired, students, caregivers, or those who are permanently unable to work.