Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Economics > Unemployment and Inflation > Flashcards

Unemployment and Inflation Flashcards

1
Q

Answer questions at beginning of slides

A

Unemployment, natural rate of unemployment, why does unemployment exist?, how is unemployment affected by unions and minimum wage laws, efficiency wages

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Groups in Labor Stats

A

Employed, Unemployed, Not in the Labor Force

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Employed

A

paid employees, self-employed, unpaid workers in family business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Unemployed

A

people not working who have looked for work during previous 4 weeks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Not in the Labor Force

A

everyone else (not working and not looking for work)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Labor Force

A

The labor force is the total number of workers (adjust population: 16 years or older), including the employed and unemployed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Unemployment Rate (“u-rate”)

A

% of the labor force that is unemployed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Unemployment Rate Equation

A

u-rate = 100 x number of employed/ labor force

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Labor Force Participation Rate

A

% of the labor force that is in the labor force

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Labor Force Equation

A

labor force participation rate: = 100 x (labor force/ adult population)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Natural Rate

A

“Normal Rate” of unemployment around which the actual unemployment rate fluctuates. Unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Cyclical Unemployment (Short Run)

A

Deviation of unemployment from its natural rate. It is closely linked to the business cycle, like higher unemployment during a recession

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Explaining Natural Unemployment (Terms)

A

Frictional unemployment, Structural Unemployment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Frictional unemployment

A

Occurs when workers spend time searching for the job that best suis their skills and tastes; when workers move between jobs - short term

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Structural Unemployment

A

Occurs when there are fewer jobs than workers - long term

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Unemployment Insurance

A

Government program that partially protects workers’ incomes when they become unemployed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Structural Unemployment

A

Occurs when wage is kept above equilibrium wage. Wages are “sticky downward” because of institutions or economics

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Structural Unemployment - Minimum Wage Laws

A

Minimum wage works just like a price floor. It may exceed the equilibrium wage for the least skilled or experienced workers, causing structural unemployment - small group cannot explain unemployment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Structural Unemployment - Unions

A

Raise the equilibrium of wage: Insiders (who remain employed) are better off;
Outsiders (workers who lose their jobs) are worse off

20
Q

Structural Unemployment - Efficiency Wages

A

Firms voluntarily pay above-equilibrium wages to boost worker productivity (either individually or as a group)

21
Q

Benefits of Wage Theory in Practice

A

Worker health: paying higher wages allows workers to eat better, healthier, more productive
Worker Turnover: minimize cost of high turnover by giving a stronger incentive to stay
Worker quality: Higher wages attracts better job applicants, increases quality of the firm’s workforce

22
Q

Implicit Contracts

A

An unwritten agreement in the labor market that the employer will try to keep wages from falling when the economy is weak or the business is having trouble, and the employee will not expect huge salary increases when the economy or the busines is strong

23
Q

Why implicit contracts?

A

Wage-setting behavior acts like a form of insurance
First will be hesitant to cut wages to avoid worker’s negative reactions (work less hard, leave the firm; see efficiency wages)

24
Q

Natural Rate of Unemployment - Summary

A

Frictional Unemployment- time to search for the right job
Structural Unemployment - above equilibrium = not enough jobs
due to minimum wage, labor unions, efficiency wages, implicit contracts

25
Q

Inflation

A

A general and ongoing rise in the level of prices in the economy

26
Q

General Inflation

A

prices do not increase by the same amount; pressure for price increases reach across most markets

27
Q

Ongoing Inflation

A

price increases in the microeconomic supply - demand model are one time events

28
Q

Basket of Goods and Services

A

Hypothetical group of different items, with specified quantities or each one, used as a basis for calculating how the price level changes over time

29
Q

Index Number

A

on arbitrary year is chosen to equal 100, and then values in all other years are set proportionally equal to that base year.

30
Q

Measure of Inflation

A

CPI - Consumer price index - measures the typical consumer’s cost of living

31
Q

CPI Equation

A

100 x cost of basket in current year/cost of basket in base year

32
Q

Inflation Rate

A

(CPI this year - CPI last year) / CPI last year) x 100%

33
Q

Core Inflation

A

Represents a long run trend in price levels. Transitory price changes are excluded

34
Q

Deflation

A

Negative Inflation

35
Q

Hyper Inflation

A

Extremely high rates of inflation

36
Q

Substitution Bias

A

Inflation rate calculated using a fixed basket of goods over time tends to overstate the true cost of living because it does not take into account that the person can substitute away from goods whose prices rise a lot.

37
Q

Quality/New Good Bias

A

Inflation calculate using a fixed basket of goods over time tends to overstate the true rising cost of living, because it does not take into account improvements in the quality of existing goods or the invention of new goods

38
Q

Alternative Price Indicies

A

Producer Price Index, International Price Index, Employment Cost Index, GDP Deflator

39
Q

GDP Deflator

A

A measure of the price level calculated as the ration of nominal GDP to real GDP times 100

40
Q

GDP Deflator Equation

A

GDP deflator = Nominal GDP/Real GDP x 100

41
Q

Inflation Rate Equation

A

Inflation Rate = ((GDP deflator this year - GDP deflator last year) / GDP deflator last year) x 100

42
Q

Converting Equation

A

Amount in Today’s dollars = amount in year T dollars x (Price level today/Price Level in year T)

43
Q

Indexation

A

Dollar amount is indexed for inflation if it is automatically corrected for inflation by law or in a contract

44
Q

Correcting Variables for Inflation - terms

A

Nominal Interest Rate, Real Interest Rate

45
Q

Nominal Interest Rate

A

Interest rate not corrected for inflation

Rate of growth in the dollar value of a deposit or debt

46
Q

Real Interest Rate

A
  • Corrected for inflation
  • Rate of growth in the purchasing power of a deposit or debt
  • Equal to the nominal interest rate minus the inflation rate

Economics (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions