Labor Market, Inflation, and the Short Run Flashcards
Why does the labor demand curve slope downwards?
Diminishing marginal product of labor.
Would a new income tax reduce or increase the employment-population ratio.
Reduce.
What happens to the labor demand curve if new regulations make it harder to fire workers?
Shifts downwards (thus wages and employment fall)
The difference between the actual and the natural rate of unemployment is called the:
Cyclical unemployment.
The unemployment rate without boom or recession is referred to as:
The natural rate of unemployment.
The natural churning of jobs in a dynamic economic is referred to as _________ unemployment.
Frictional unemployment.
Natural unemplyoment resulting from institutional misallocation of resources is referred to as ___________ unemployment.
Structural unemployment.
Actual unemployment can be split into the sum of three unemployments:
Frictional + structural + cyclical
What does the rate s indicate in the bathtub model?
Job separation rate
What letter indicates the job finding rate in the bathtub model?
f
How are the supply and wages of college grads increasing?
The demand for college grads is rising even faster.
The _____ change in an economy’s overall _____ level is known as inflation.
Percentage, price.
As a measure of money supply, what does ‘monetary base’ include?
All currency plus reserves.
Are broader measures of money supply like M1 and M2 more or less liquid than the monetary base?
Less liquid.
The quantity theory of money is MV=PY. What is each variable?
M = money in circulation
V = velocity of money
P = price level
Y = real GDP
The rate at which money is exchanged in an economy is called:
The velocity of money.
The right side of the quantity equation, PY, is otherwise known as _____ GDP.
Nominal.
Quantity equation for price levels P = MV/Y. This tells us two ways that price levels can go up:
- Supply of money increases.
- Real GDP decreases.
What is the concept of the neutrality of money?
Changes in money supply have no LONG RUN real effects on the economy, only prices.
The nominal interest rate is the _____ rate plus the _____ rate.
Real, inflation.
What three variables add together for the government budget constraint?
T (tax) + B (debt) + M (new money)
What is the revenue from printing new money called?
Seignorage or inflation tax.
Who pays the ‘inflation tax’?
Anyone who holds currency.
Detrended output is another word for:
Short-run output.
Booming economies have high inflation, slumping economies have low inflation - which curve shows this relationship?
The Phillips curve.
Okun’s law claims a strong negative relationship between what two variables?
Output and unemployment.
