Chapter 5

Question 1

Frictional Unemployment

Answer 1

people who left their jobs to find a better one or because of from one place to another or who just joined the workforce for the first time

Question 2

Structural Unemployment

Answer 2

People not working because they lack skills required by available jobs (there is a mismatch)

Question 3

Cyclical Unemployment

Answer 3

Not working because of the recession

Question 4

Natural Employment

Answer 4

Even with Full employment, frictional and structural always exist

Question 5

Labor force

Answer 5

employed + unemployed

Question 6

Okuns law

Answer 6

for every increase in cyclical employment by 1%, output decreases by 2%

Question 7

Underground economy

Answer 7

gov mistakenly count people as unemployed but they are currently working under the table illegally

Question 8

discouraged workers

Answer 8

lazy bums who out of labor force

Question 9

underemployed

Answer 9

doctors working at mcdonalds

Question 10

Business cycles

Answer 10

Short term fluctuations in the level of economic activity, actual output fluctuates around the potential output

Question 11

Stages of business cycle

Answer 11

Peak, Trough, Contraction, Recovery, Recession, Expantion

Question 12

Peak

Answer 12

The highest point of the cycle where output reaches its max

Question 13

Trough

Answer 13

The lowest point of a cycle where output reaches its min

Question 14

Contraction

Answer 14

is a drop in output and employment

Question 15

Recovery

Answer 15

is an increase in output and employment

Question 16

Recession

Answer 16

a period during which there is a contraction

Question 17

expansion

Answer 17

a period during which there is a recovery

Question 18

Depression

Answer 18

prolonged recession

Question 19

boom

Answer 19

prolonged expansion

Question 20

inflation

Answer 20

continuous increase in the price level

Question 21

deflation

Answer 21

continuous deflation in the price level

Question 22

base year

Answer 22

reference year we compare our situation now relative to that year (cpi equals 100 for base)

Question 23

Indexing

Answer 23

salaries increase every year to compensate for inflation

Question 24

Shoe-leather cost

Answer 24

people keep their money in the bank because it gives some return rather than just having it in your pocket. so they lose time going to the bank.