Midterm 1: Chapter 9 Flashcards
Who conducts the Current Population Survey/ household survey
US Bureau of the Census
what are the conditions for someone to be considered employed
- Worked during the week at some point
2. away from jobs only due to illness, vacation or on strike
What are condition for someone to be considered unemployed
available and actively looking for work in the past 4 weeks but don’t have a job
What is the labor force and what is the unemployment rate
the labor force is the sum of the employed and unemployed workers.
the unemployment rate is the percentage of labor force that is unemployed
who are people not considered to be in the labor force?
retirees, homemakers, full-time students, military service, prisoners, people in mental hospitals
What are discouraged workers
They have not looked for a job in the last 4 weeks because they believe no jobs will be available for them (not counted in unemployment rate though)
formula for unemployment rate
Number unemployed / labor force * 100
Labor force participation rate
percentage of working age pop in labor force
formula - labor force / working-age pop. * 100
Employment population ratio and formula
measures percentage of working age population that is employed
Employed / working age pop. * 100
some of the problems with the unemployment rate (understate joblessness)
not a perfect measure of joblessness
During a recession there is an increase in discouraged workers
Also part-time jobs count as being employed
Problems with unemployment that overstate the amount of joblessness
Some people who claim to be looking for a job may not actually be looking,
Also people could be employed in illegal activities, such as drug dealing, that are not counted for
What is the link between Labor Force Participation Rate and GDP and GDP per person
The higher the Labor Force Participation Rate, the higher the country’s GDP
What is the name of another Survey that the BLS conducts to measure company payrolls?
Payroll survey / establishment survey
What is the establishment survey
samples about 300,000 businesses, and asks about the # employed and on a payroll - shows how many people are employed on a company payroll, relies on actual payrolls instead of unverified answers
What are the drawbacks of the establishment survey
- does not provide info on self-employed people
- Fails to count people employed at newly opened firms that aren’t in the survey
- no information of unemployment
- data is constantly revised as more data from companies come in
What do gov agencies usually do to prevent long waits for policymakers and the general public
Gov gives out estimates that they revise as more information comes in
ex: 2007 recession turned out to be much more severe than economists realized at the time
Why are millions of jobs created and destroyed every year
changes in consumer tastes, technology, and the success/failures of entrepreneurs
When the BLS announces the changes in employment, these figures are considered to be the _____ in the number of jobs created
Change = net jobs created
What are the 3 types of unemployment and describe them
- Frictional unemployment
- short term unemployment that comes from people switching jobs - structural unemployment
- a mismatch between the job skills/ attributes of worker and requirements for the job - cyclical unemployment
- workers who lose their job due to a recession
what are some factors that cause frictional unemployment
Seasonal unemployment (due to weather factors)
some factors that cause structural unemployment
competition from foreign producers, technological changes, and machines substituting jobs
When is economy considered to be a full employment
When the level of cyclical unem. = 0 and the only two factors remaining are frictional and structural
natural rate of unemployment
normal rate of unemployment consisting of frictional and structural (sometimes called full-employment rate of unemployment
How can the gov intervene to help the unemployment rate
implement programs that train people who are unemployed (some policies though, increase the unemployment rate)
what are some of the benefits for unemployment insurance
it helps people who are currently looking for jobs to no suffer greatly, causing reduced spending and over-all weakening the US economy
what are labor unions
Organizations of workers that bargain employers for higher wages and usually better working conditions
what is an efficiency wage
above market price wage that firms give to some employees to encourage them to work harder
what is the price level
a measure of the average prices of goods and services in the economy
what is the inflation rate
increase in percentage of price level from one year to the next
What is CPI
a measure of the average change over time in prices the typical urban family of four pays for goods and services
one year is chosen as the base year
What are some of the biases in CPI
substitution bias (assume consumer will buy same quantity of goods )
Increase in quality bias - increase in price reflects improved quality
New product Bias -
outlet bias - consumers increased purchasing from discount stores such as Costco and places on the Internet
What is the Producer Price index
tracks prices firms receive for goods and services at all stages of production (changes can warn changes in CPI)
Difference between nominal and real variables?
nominal - values in current year prices
real - prices from base year in price index (base year is currently 1984
Interest Rates
cost of borrowing funds expressed as a percent of the amount borrowed
nominal interest rate
the stated interest rate on a loan
real interest rate
corrects nominal interest rate for the effect inflation has on purchasing power
What happens when inflation rates are higher than expected
borrowers pay and lenders receive lower real interest rate than the two expected
how do we measure nominal interest rate as a whole
as the interest rate on the three-month US treasury bills
what is deflation
negative rate of inflation
what are menu costs
costs to firms of changing prices
