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Macroeconomics > Measuring Inflation and Unemployment > Flashcards

Measuring Inflation and Unemployment Flashcards

1
Q

Inflation

A

Increase in prices in economy and decrease in the purchasing power of money. Measures an increase in the cost of living

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2
Q

How people protect themselves against inflation?

A

They demand higher wages, invest in assets вклады that earn interest or increase in value over time. Cash doesn’t protect money against inflation

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3
Q

Does Treasury inflation-protected security pay fixed interest?

A

Yes, it does

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4
Q

What can cause inflation?

A

Demand factors, supply shocks and government policy

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5
Q

Price level

A

It is the average of current prices across the entire spectrum of goods and services. Absolute level of a price index, whether it is the consumer price index (CPI, retail price), the producer price index (PPI, wholesale prices), GDP deflator.

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6
Q

Rate of inflation

A

The percentage increase in prices over a 12-month period

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7
Q

Disinflation

A

Reduction in the rate of inflation

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8
Q

Deflation

A

Decline in overall prices throughout the economy

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9
Q

What is used to measure the inflation?

A

Consumer price index CPI, producer price index PPI and GDP deflator

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10
Q

Consumer price index CPI

A

Index of the average prices paid by urban consumers CPI-U and urban wage earners and clerical workers CPI-W for a clerical basket of consumer goods and services. CPI=(market basket cost in current period/market basket cost in base period)x100

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11
Q

Market basket

A

Selection of goods that are constantly purchased and sold

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12
Q

What does cost of living index compare?

A

It compares the cost of maintaining the same standard of living in the current and base periods

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13
Q

Cost of goods index

A

Meadow the average change over time in the prices paid by urban consumers

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14
Q

What does Bureau of labour statistics (BLS) include?

A

Consumer expenditure survey, telephone point of purchase survey and census data данные переписи to measure changes in consumer prices

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15
Q

What formula is used to calculate the percentage change in price?

A

% change in price = ((CPI in current year/CPI in original year)х100)-100

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16
Q

What isn’t included in CPI?

A

Public goods (national defence spendings), environment, homeland security, life expectancy, crime rates, climate change, product substitution

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17
Q

Why does CPI tend to overstate inflation?

A

Fixed market basket = Product substitution, quality improvements, new products

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18
Q

Personal consumption expenditures

A

Another measure of inflation. Uses a system that adjust the weights for different categories of goods and uses actual sales data

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19
Q

Producer price index PPI

A

Index of the average prices received by domestic producers for their output. It measures the net revenue accruing начисляющийся to a representative firm for a specific products. Excise taxes are excluded. Rebate offers or zero-interest loans are included. The products measured are the same from month to month, so PPI has same problems as CPI (quality changes, deleted products, manufacturers existing the industry)

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20
Q

Rebate option

A

A partial refund of the cost of an item

21
Q

GDP deflator

A

Index of the average prices for all goods and services, including consumer goods, investment goods, government goods and exports

22
Q

For what are price indexes used?

A

For escalating and deflating. They protect people’s wages as well as from spikes in prices

23
Q

Escalation

A

Persistent rise in the price of the specific goods due to combination of inflation, supply/demand, environment and so on

24
Q

Deflation

A

Adjusting some current value (nominal value) (declining) for the impact of inflation creating real value.

25
Q

What formula is used to calculate the real value?

A

Real value = nominal x (base year index (GDP deflator)/current year index)

26
Q

Hyperinflation

A

High rate level of inflation. Is caused by an excess of government spendings over tax revenues (high deficit) coupled with the printing of money to finance these deficits

27
Q

What does BLS report?

A

It reports 3 major monthly numbers: size of the labour force, number of people employed, numbers of unemployed

28
Q

How to calculate an unemployment rate?

A

Unemployment rate = numbers of unemployed people/labor force

29
Q

People are counted as employed if:

A

They have performed any work at all for pay or profit deriving the survey week

30
Q

Unpaid family workers

A

Work more or 15 hours a week on a family enterprise. Counted as employed too

31
Q

People are counted as unemployed if:

A

They do not have a job but are available for work and seek it for previous 4 weeks

32
Q

Labour force participation rate

A

Percentage of the adult noninstitutionalised population that is in the labour force

33
Q

Unemployment statistics include:

A

Gauging the state of the economy, determining the divergence of supply and demand, assessing оценивание the distribution of unemployment and the extent to which people are suffering from being out of work

34
Q

Marginally attached workers

A

Portion of marginally attached workers who have given up actively looking for work and are not counted as unemployed. Can be affected by recession and family duties

35
Q

Underemployed workers

A

Workers who are forced to take up jobs that do not fully utilise their education, skills and so on.

36
Q

Why do employers keep wages above the market equilibrium?

A

To reduce turnovers, boost morale, increase employees’ productivity. These efficiency wages give employees an incentive to work

37
Q

Frictional unemployment

A

Result from workers who voluntarily quit their jobs to search for better positions or are moving to new jobs but may take several days or weeks before they can report to their new employers

38
Q

Structural unemployment

A

Unemployment caused by changes in the structure of the consumers’ demand or technology. Demand falls - skills of workers are not needed. Associated with extended periods of unemployment

39
Q

Cyclical unemployment

A

Unemployment which results from changes in the business cycles and where policymakers can have the greatest impact by keeping the economy on a solid growth path

40
Q

Natural rate of unemployment

A

Level of unemployment at which price and wage decisions are consistent последовательные. Level at which actual rate = people’s inflationary expectations and where cyclical unemployment is 0. Calculated by adding frictional and structural unemployment

41
Q

Nonaccelerating inflation rate of unemployment NAIRU

A

Unemployment rate most consistent with a low level rate of inflation. Inflationary pressures are at their minimum

42
Q

Four key markets

A

Labor, financial, capital, output. Affect job growth

43
Q

What happens if increase in GDP is the same as an increase in GDP deflator?

A

There is no an increase in real output

44
Q

Overstated inflation

A

When the price of a product increases substantially, consumers tend to substitute lower-priced alternatives. CPI overstate inflation because it comprises substitute and quality biases. Real earnings look smaller because they are adjusted for that level of inflation

45
Q

Understated inflation

A

Quality adjustments cause inflation to be understated. They may account for improvements in standard of living, but the consumer doesn’t pay lower prices

46
Q

How to find new value (salary for example)?

A

New salary=old x CPI in current year/CPI in base year

47
Q

Misery index

A

An informal measure of the state of an economy generated by adding together its rate of inflation and rate of unemployment

48
Q

Jobless recovery

A

GPD increases with no increase in employment

49
Q

How to calculate an inflation rate?

A

Inflation rate = (current CPI/previous CPI x 100) - 100 or rate of inflation = ((CPI current period-CPI previous period)/CPI previous period)x100

Macroeconomics (11 decks)

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