chapter 5 Flashcards
(12 cards)
unemployment rate formula
number of people unemployed / labour force x 100
involuntary part-time rate
number of involuntary part time workers / labour force x 100
to be counted as unemployed, a person must be in one of what 3 categories:
- on temporary layoff with an expectation of recall
- without work but has made specific efforts to find a job within the previous four weeks
- has a new job to start within four weeks
cyclical unemployment
the higher than normal unemployment at a business cycle trough and lower than normal unemployment at a business cycle peak
frictional unemployment
arises from normal labour market turnover, job creation, labour force (re)entry
structural unemployment
created by changes in technology and foreign competition that change the skills
needed to perform jobs or the locations of jobs
CPI formula
(Cost of the basket at current-period prices ÷ Cost of the basket at base-period prices) x 100
if CPI is at 140, what does this mean?
CPI is 40 percent higher than it was in the base period (40% inflation rate); something that cost $100 would now cost $140
new goods bias
New goods that were not available in the base year appear and, if they are more expensive than the goods they replace, they put an upward bias into the CPI.
quality change bias
Quality improvements occur every year. Part of the rise in
the price is payment for improved quality and is not
inflation.
commodity substitution bias
The market basket of goods used in calculating the CPI is
fixed and does not take into account consumers’
substitutions away from goods whose relative prices
increase.
outlet substitution bias
As the structure of retailing changes, people switch to
buying from cheaper sources, but the CPI, as measured,
does not take account of this outlet substitution.
