Principles of Economics chapter 8

Question 1

What is unemployment

Answer 1

Unemployment is the number of people who are actively looking for work but aren’t
currently employed.

Question 2

What is the labor force

Answer 2

The labor force is equal to the sum of employment and unemployment.

Question 3

What is the labor force participation rate

Answer 3

The labor force participation rate is the percentage of the population aged 16 or older
that is in the labor force.

Question 4

What is the unemployment rate

Answer 4

The unemployment rate is the percentage of the total number of people in the labor force who are unemployed.

Question 5

What are discouraged workers

Answer 5

Discouraged workers are nonworking people who are capable of working but have given up looking for a job given the state of the job market.

Question 6

What are marginally attached workers

Answer 6

Marginally attached workers would like to be employed and have looked for a job in the recent past but are not currently looking for work.

Question 7

What is underemployment

Answer 7

Underemployment is the number of people who work part time because they cannot find full-time jobs.

Question 8

What is a jobless recovery

Answer 8

A jobless recovery is a period in which the real GDP growth rate is positive but the unemployment rate is still rising.

Question 9

What is a job search

Answer 9

Workers who spend time looking for employment are engaged in job search.

Question 10

What is frictional unemployment

Answer 10

Frictional unemployment is unemployment due to the time workers spend in job search.

Question 11

What is structual unemployment

Answer 11

In structural unemployment, more people are seeking jobs in a particular labor market than there are jobs available at the current wage rate, even when the economy is at the peak of the business cycle.

Question 12

What is a minnimum wage

Answer 12

A minimum wage is a government-mandated floor on the wage rate.

Question 13

What is a union

Answer 13

A union is an organization of workers that bargains collectively with employers to raise
wages and improve working conditions.

Question 14

What are efficiency wages

Answer 14

Efficiency wages are wages that employers set above the equilibrium wage rate as an incentive for better employee performance.

Question 15

What is the natural wage of unemployment

Answer 15

The natural rate of unemployment is the unemployment rate that arises from the effects of frictional plus structural unemployment.

Question 16

What is cyclical unemployment

Answer 16

Cyclical unemployment is the deviation of the actual rate of unemployment from the natural rate due to downturns in the business cycle.

Question 17

What is the real wage

Answer 17

The real wage is the wage rate divided by the price level.

Question 18

What is the real income

Answer 18

Real income is income divided by the price level.

Question 19

What are shoe-leather costs

Answer 19

Shoe-leather costs are the increased costs of transactions caused by inflation.

Question 20

What are menu costs

Answer 20

The menu cost is the real cost of changing a listed price.

Question 21

What are the unit-of-account costs of inflation

Answer 21

The unit-of-account costs of inflation are the costs arising from the way inflation makes money a less reliable unit of measurement.

Question 22

What is the interest rate

Answer 22

The interest rate on a loan is the price, calculated as a percentage of the amount borrowed, that lenders charge borrowers the use of their savings for one year.

Question 23

What is the nominal interest rate

Answer 23

The nominal interest rate is the interest rate expressed in dollar terms.

Question 24

What is the real interest rate

Answer 24

The real interest rate is the nominal interest rate minus the rate of inflation.

Question 25

What is disinflation

Answer 25

Disinflation is the process of bringing the inflation rate down.