Chapter 5 - measuring the economy

Question 1

besides GDP, what is another way to determine how well an economy is doing?

Answer 1

unemployment rates

Question 2

what does unemployment mean to an individual?

Answer 2

loss of income

Question 3

when unemployment is high, what else is usually high?

Answer 3

crime rates

Question 4

on an economic perspective, what does unemployment mean?

Answer 4

as a country we are not optimizing our resources, and losing production

Question 5

when unemployment leads to less production, what does that mean

Answer 5

a lower gdp

Question 6

when people are unemployed for a period of time, what do they lose? what does this mean on an economical point of view.

Answer 6

their valuable skills; not being efficient

Question 7

how do you be counted in the labour force?

Answer 7

• employed (part or full time)

- unemployed but actively seeking a job.

Question 8

to be counted as unemployed (in the labour force), a person must fall into one of the three categories:

Answer 8

• temporary layoff
• no job but made efforts
• has a job starting soon

Question 9

the working age population is divided into two groups:

Answer 9

people in the labour force, and people not in the labour force

Question 10

the labour force consists of

Answer 10

employed and unemployed workers

Question 11

not working does not equal unemployed. T/F

Answer 11

T

Question 12

how do you find the labour force participation rate?

Answer 12

labour force divided by working age population x100

Question 13

how do you find unemployment rate?

Answer 13

of unemployed people divided by abour force x 100

Question 14

to find the employment rate you…

Answer 14

divide the number of employed by working age population x100

Question 15

to find involuntary part time rate you…

Answer 15

divide the number of involuntary part time byt the labour force x 100

Question 16

Unemployment can be classified into three types:

Answer 16

Frictional unemployment
Structural unemployment
cyclical unemployment

Question 17

What does frictional unemployment mean?

Answer 17

short term unemployment caused by the ordinary difficulties of matching employee to employer

Question 18

what does structural unemployment

Answer 18

means job sectors that are are not needed in market / jobs that are removed permanently

Question 19

give 2 example of structural unemployment?

Answer 19

autonomous truck drivers, DV sectors

Question 20

is it a good thing when structural unemployment happens?

Answer 20

yes, because it indicates that there is an improvement of technology

Question 21

Frictional unemployment and structural unemployment happen regardless of how well the economy is doing. T/F?

Answer 21

T

Question 22

what does cyclical unemployment mean?

Answer 22

employment depends on the state of the economy

Question 23

when the economy is ding well, on a cyclical employment prospective, explain what would happen to the hiring process.

Answer 23

since the economy is doing well, people are spending more on goods and services, which leads to more hiring

Question 24

frictional and structural unemployment are signs of a __ economy

Answer 24

healthy

Question 25

when a student graduates and starts to look for work, they are officially ___

Answer 25

unemployed

Question 26

natural unemployment arises from what

Answer 26

frictional and structural unemployment when there is no cyclical unemployment

Question 27

when cyclical unemployment is equal to 0, this means there is a __

Answer 27

natural unemployment

Question 28

full employment is defined as

Answer 28

when the unemployment rate equals the natural unemployment rate

Question 29

Unemployment creates two social problems:

Answer 29

1: loss of income from production | 2. loss of human skills (or human captial)

Question 30

differentiate between the working population and the non working population

Answer 30

working: 15 and older | non working: under 15

Question 31

t/f full employment means everyone is employed in the economy

Answer 31

f

Question 32

when an economy is at full employment, there is NO __ unemployment

Answer 32

cyclical unemployment

Question 33

what is the type of GDP called when there is full employment?

Answer 33

potential GDP

Question 34

potential GDP means what

Answer 34

when the economy is at full employment

Question 35

potential GDP can also be known as the

Answer 35

capacity of the economy

Question 36

the gap between the real GDP and the Potential GDP is called what?

Answer 36

output gap

Question 37

what does price level mean?

Answer 37

is the average level of prices of goods and services and the value of money

Question 38

what does inflation mean?

Answer 38

persistently rising price level

Question 39

what does deflation mean?

Answer 39

persistently falling prices

Question 40

why would we be interested in the price level?

Answer 40

1. measure the inflation rate and deflation rate | 2. distinguish between money values and the real values of economic variables

Question 41

a one shot rise of price is considered inflation, T/F?

Answer 41

F, it must be consistent

Question 42

what happens to our purchasing power during inflation

Answer 42

it falls (less purchasing power)

Question 43

distinguish between real interest rates and nominal interest rate

Answer 43

real interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds. nominal interest rate refers to the interest rate before taking inflation into account.

Question 44

real interest rate is denoted by

Answer 44

r

Question 45

nominal interest rate is denoted by

Answer 45

i

Question 46

when a question asks for the base years' inflation rate, what do you say?

Answer 46

cannot be determined because we do not have the value from the previous year

Question 47

is deflation a good thing? explain why

Answer 47

-no. Because if consumers see that the prices are consistently falling they're not going to buy anything

Question 48

what is an important thing to recognize about consumer price index?

Answer 48

it does not take into account the goods and services that consumers do not care about

Question 49

using a consumer price index perspective: out of the products: parking meters, hot dogs, tractors, and dvds. Which 2 products be cared about

Answer 49

dvds and hot dogs

Question 50

what a question asks about the cpi basket, it is referring to

Answer 50

the quantity of goods that CONSUMERS would want

Question 51

Real wage means

Answer 51

how much you actually buy with your wage

Question 52

People who are unemployed but are not actively looking for a job, are not counted in the

Answer 52

Labor force

Question 53

What does unemployment rate mean?

Answer 53

It’s a measurement of people who want a job that can find a job

Question 54

the total population is divided into the ___ and __

Answer 54

working age and others

Question 55

the working-age population is divided into

Answer 55

people in the labour force and not in the labour force

Question 56

the labour force is divided into

Answer 56

employed and non employed

Question 57

employed employees are either __ time or ___ time,

Answer 57

full time and part-time

Question 58

the employed part-time are either

Answer 58

voluntary or non-voluntary

Question 59

the labour force is the sum of

Answer 59

employed and non employed

Question 60

to be counted as employed one must

Answer 60

have a full time or part time job

Question 61

to be counted as unemployed

Answer 61

temporary layoff actively looking for work new job that starts in the next 4 weeks

Question 62

individuals that are in the working-age but are not employed or unemployed are not

Answer 62

counted into the labour force

Question 63

the four indicators of that state of the labour market:

Answer 63

unemployment rate employment rate involuntary part time rate labour force participation rate

Question 64

the unemployment rate is defined as

Answer 64

the percentage of the people in the labour force who are unemployed

Question 65

the unemployment rate is defined as

Answer 65

the percentage of the people in the labour force who are unemployed

Question 66

what does involuntary part-time mean?

Answer 66

the people working in the labour force that want full time but are instead working part-time

Question 67

define the labour force participation rate

Answer 67

percentage of working-age members who are part of the labour force

Question 68

employment rate is defined as

Answer 68

the percentage of people of working age who have jobs

Question 69

the unemployment rate is the percentage of the people in the __ who are unemployed

Answer 69

labour force

Question 70

the labour force participation rate is the __ who are members of the labour force

Answer 70

working age population

Question 71

employers no longer needing a set of skills is also referred to as what kind of unemployment

Answer 71

structural unemployment

Question 72

when you look at a graph and there is a downward slope, what kind of unemployment would this be indicating?

Answer 72

cyclical unemployment

Question 73

frictional and structural unemployment make up what?

Answer 73

natural unemployment

Question 74

what is the natural rate of unemployment?

Answer 74

the amount of unemployment that would occur when the economy is at full employment

Question 75

does full employment require 100 percent employment?

Answer 75

nope, as long as 5 percent of the workforce is looking for a job

Question 76

which unemployment's make up natural unemployment

Answer 76

frictional and structural unemployment

Question 77

"Robin is quitting his current job to find another that has better prospects." is an example of what kind of unemployment?

Answer 77

frictional

Question 78

" outsourcing resulted in many jobs lost" is an example of what kind of unemployment

Answer 78

structural unemployment

Question 79

what happens to cyclical unemployment during a recession?

Answer 79

it increases unemployment

Question 80

people leave their jobs and spend time searching for another job that better suits their abilities. Does this lead to unemployment

Answer 80

yes

Question 81

a discouraged searcher

Answer 81

has stopped looking for a job because of repeated failure to find one

Question 82

The labour force participation rate is the percentage of the​ _____ who are members of the labour force.

Answer 82

working-age population

Question 83

The natural unemployment rate is the unemployment rate when the economy is​ _____.

Answer 83

full emloyment

Question 84

full employment means

Answer 84

all who are able and willing to work are employed.

Question 85

Full employment is when there is no​ _____ unemployment​ or, equivalently, when all the unemployment is​ _____ or​ _____.

Answer 85

cyclical; frictional; structural

Question 86

The output gap is real GDP minus​ _____ expressed as a percentage of​ _____.

Answer 86

potential​ GDP; potential GDP

Question 87

The natural unemployment rate is the unemployment rate when the economy is​ _____.

Answer 87

at full employment

Question 88

The price level is the​ _____.

Answer 88

average level of prices

Question 89

The inflation rate is the percentage change in the​ _____ from one year to the next. Deflation is a situation in which the​ _____ is​ _____ and the inflation rate is​ _____.

Answer 89

price​ level; | price​ level; falling; negative

Question 90

The Consumer Price Index is a measure of the​ _____ of the prices paid by​ _____ consumers for a fixed market basket of consumption goods and services.

Answer 90

average; urban

Question 91

what does gdp deflator mean?

Answer 91

the GDP price deflator shows how much a change in GDP relies on changes in the price level.