Monitoring Jobs and Inflation

Question 1

Counted as unemployed

Answer 1

• available work within 2 works following interview
  1) Waiting start job next 30 days
  2) Waiting callback job
  3) specific efforts find job previous 4 weeks

Question 2

Different stages

Answer 2

1) POPULATION
2) WORK AGE POPULATION (16, prison) OTHER
3) WORK FORCE/ ECONOMICALLY ACTIVE (have/willing take job), ECON INACTIVE (education, retired)
4) EMPLOYED (have), UNEMPLOYED (3)

Question 3

3 Labour market indicators

Answer 3

1) Unemployment rate = unemployed/workforce*100
2) Employment rate = employed/ work age pop 100
3) Economic activity rate = workforce/work age pop100

Question 4

Definitions of econ inact + unemployed

Answer 4

1) Discouraged workers (did want job but stopped rep failure)
2) Other wants a job ( 3 - unemployed)

Question 5

Different types unemployment

Answer 5

1) Frictional - Job destruction (young)
2) Structural - technological (old)
3) Cyclical - recision/dep
4) Natural - frict & structural

Question 6

Influences 4 main factors

Answer 6

1) age distribution pop - younger more job seek
2) Scale of structural - fast changing asian
3) Real wage rate - attract more not leave
4) Unemployment benefits - increase nat, low op cost job search

Question 7

Real GDP and Unemployment over business cycle

Answer 7

• quantity of real GDP at full employment is Pot GDP
• business cycle real GDP fluctuates around pot
• output gap (gap between real and pot)
• as gap fluctuates over cycle, unemployment rate fluctuates around natural unemployment rate

Question 8

Correlation between unemployment, and natural, and real GDP and potential

Answer 8

1) Unemployment = Natural, real = pot, Gap = 0
2) unemployment < natural, real GDP > pot, Gap +
3) Unemployment > natural, real GDP< pot, Gap -

Question 9

Why is sudden Inflation/Deflation problem

Answer 9

1) Redistributes incomes (less for money)
2) Redistributes wealth (loans)
3) Covers Real GDP and unemployment (rises profits inflation)
4) Directs resources from production

Question 10

Price indexes

Answer 10

1) Retail (RPI) - g/s bought by households, more weight housing, 5 categories
2) Consumer (CPI) - g/s bought private households, more categories
- both measure prices paid consumers for fixed ‘basket’ g/s

Question 11

Calculating PI

Answer 11

• conduct surveys
  1) find cost basket base period
  2) cost basket current period
  3) calculate index for both
  4) RPI = cost basket current/cost base *100

Question 12

Measuring inflation rate

Answer 12

• (RPI this year - last year)/last year *100

- high inflation (high increase RPI)

Question 13

3 main sources of bias price index’s

Answer 13

1) new goods (type writers)
2) quality bias (quality increases price not inflation)
3) substitution bias (seek less costly items)

Question 14

Consequences

Answer 14

1) pensions calculated on government outlays

2) interest rates banks

Question 15

Alternative: GDP deflator

Answer 15

• covers all items
• GDP deflator = nominal GDP/real GDP *100
• broader PI for macro