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ECON 104 > Chapter 9 > Flashcards

Chapter 9 Flashcards

1
Q

the us department of labor reports estimates of

A

employment, unemployment, other stats, and is related to the labor force each month

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2
Q

labor force

A

the sum of employed and unemployed workers in the economy

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3
Q

the most watched statistic

A

unemployment rate

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4
Q

to be unemployed you must

A

be counted in the labor force

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5
Q

employed characteristics

A

worked 1 hour in reference week or were temporary away from job

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6
Q

unemployed characteristics

A

not currently at work, but available for work, and who has actively looked for work during the previous month

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7
Q

discouraged workers

A

people who are available to work but have not looked for a job during the previous 4 weeks and this is not considered unemployed

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8
Q

unemployment rate equation

A

of unemployed/# of labor force x 100 (for %)

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9
Q

this most-common measure of unemployment is known formally as BLS series

A

U-3

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10
Q

labor force participation rate equation

A

in the labor force/# working age population x 100

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11
Q

employment population ratio

A

of employed/# in working age population x 100

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12
Q

why is the BLS not a perfect measure of joblessness

A
  1. separating “unemployed” and “not in the labor force” requires judgement
    -should we exclude “discourage workers?
  2. only measures employment, not “intensity” of employment
    -full time vs. part time
    -people may be underemployed
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13
Q

example of underemployed

A

has a PHD in econ but drives a catabus

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14
Q

the BLS could also overstate unemployment

A

people might claim falsely to be actively looking for work
may claim not to be working to evade taxes or keep criminal activity unnoticed

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15
Q

U-6 is U-3

A

plus discouraged workers, underemployed workers, and some others

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16
Q

long periods of unemployment are especially bad for workers

A

skills decay, risk becoming discouraged and depressed

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17
Q

since 1948, the LFPR for adult men has

A

gradually declined

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18
Q

but for adult women, it has

A

increase greatly

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19
Q

why has women greatly increased LFPR rates

A

change in traditional roles, more women in college, getting married at older ages, more childcare, technology

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20
Q

why has men decreased LFPR rates

A

less manual labor jobs, stay in school longer, criminal records, marrying later (no urgency), women less likely to marry without a college degree, video games

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21
Q

reduction in hours worked- good

A

if we are very productive and can get same (or more) output in fewer hours

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22
Q

reduction in hours worked- bad

A

if there are structural problems preventing job seaters from working

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23
Q

establishment survey

A

asks companies who is on their payroll to calculate unemployment

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24
Q

disadvantages of establishment survey

A

self-employed people not surveyed, new firms omitted, information on employment only, numbers fluctuate depending in establishments (big revisions needed)

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25
Q

advantages of establishment survey

A

data is determined by actual payroll, not self-reporting like the household survey

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26
Q

we do not expect the numbers to be identical between the two survey’s because

A

different groups are measured
all surveys have measurement errors

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27
Q

frictional unemployment

A

“not bad”
occurs mostly because of job search:
entering or re-entering the labor force or in between jobs

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28
Q

seasonal unemployment

A

some jobs fluctuate in availability due to seasonal demand

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29
Q

to control seasonal unemployment, the BLS releases raw and seasonally adjusted employment which

A

some frictional unemployment actuals increases economic efficiently by allowing for better job matches

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30
Q

structural unemployment

A

unemployment that arises from a persistent mismatch between the skills and attributes of workers and the requirements of jobs

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31
Q

examples of structural unemployment

A

VCR repairman is unemployed today
-need retraining in order to get “modern” jobs

32
Q

cyclical unemployment

A

unemployment causes by a business cycle recession
(in normal recoveries after a recession, unemployment due to cyclical factors will fail)

33
Q

full employment

A

when all unemployment is due to frictional and structural factors
(always some type of unemployment)

34
Q

natural rate of unemployment

A

the normal rate of unemployment, consisting of frictional unemployment and structural unemployment
between 5%-6%

35
Q

what type of unemployment is this trying to reduce: the federal government’s trade adjustment assistance program offers training to workers whose firms laid them off as a result of competition from foreign firms

A

structural unemployment

36
Q

what type of unemployment is this trying to reduce: subsidize new hires

A

frictional unemployment

37
Q

government policies that increase unemployment

A

unemployment insurance
“extreme” minimum wage laws

38
Q

if unemployment insurance payments are available and you just lost your job

A

you will be more likely to search for a better job than just taking the first job you see

39
Q

economists believe that high unemployment rates correspond

A

with more generous unemployment insurance

40
Q

minimum wage laws are designed to help low-income workers; but

A

at some point, raising the wage that firms must pay will result in them hiring fewer workers

41
Q

relatively few full-time adults earn minimum wage, the group most likely to receive minimum wage is

A

teenagers

42
Q

unemployment only causes small

A

wage increases and that with a 10% increase, only 2% reduce teenage employment

43
Q

labor unions goal

A

bargain with employers for higher wages and better working conditions

44
Q

union workers are probably not

A

a significant cause of unemployment in US

45
Q

efficiency wage

A

an above-market wage that a firm pays to increase workers’ productivity

46
Q

why would a firm pay workers wages that are higher than the market wage?

A

motivated to perform well and keep job
reduces turnover and costly hiring

47
Q

above-market wages may make

A

frictional unemployment longer
-firm won’t hire as many people as quickly due to higher wages

48
Q

price level

A

a measure of the average prices of goods and services in the economy

49
Q

inflation rate

A

the % increase in the price level from one year to the next

50
Q

two commonly-used measures

A
  1. the consumer price index (CPI)
  2. the producer price index (PPI)
51
Q

consumer price index

A

a measure of the average change over time in the prices a typical urban family of four pays for the goods and services they purchase

52
Q

what you need to calculate CPI in a given year

A
  1. a “basket” of goods
  2. fixed quantity from base year
  3. prices from current and base years
53
Q

cpi=

A

expenditures in the current year/expenditures in the base year x 100

54
Q

inflation rate is calculated through

A

percentage change formula

55
Q

two measures of inflation

A

GDP deflator and CPI

56
Q

To use the GDP deflator

A

need to find nominal and real GDP in each year, and take the percentage change of the GDP deflator to find inflation

57
Q

economic growth is typically measured by changes in real GDP per capita over time and want

A

to measure production and output changes (NOT price increaes)

58
Q

CPI is NOT

A

looking at production, just at price increases of the “basket”

59
Q

CPI just includes

A

consumer prices
-not government purchases

60
Q

if you want to get a measure of how inflation affects your daily spending,

A

use CPI (also known as cost of living index)

61
Q

CPI inflation is sometimes used to

A

generate “fair” increases in wages and government benefits

62
Q

substitution bias

A

consumers may change their purchasing habits, not buy as many goods if price is higher

63
Q

increase in quality bias

A

products like cars and computers have become more durable and better quality over time

64
Q

new product bias

A

the basket of goods changes only every 10 years

65
Q

example of new product bias

A

streaming services

66
Q

outlet bias

A

increases in purchases from discount stores like sam’s club and costco or the internet are not incorporated into the CPI (still uses full-retail price)

67
Q

for the biases, economists believe that

A

CPI overstates true inflation by 0.5 to 1 percentage points

68
Q

producer price index

A

an average of the prices received by producers of goods and services at all stages of the production process

69
Q

PPI can give an early warning of

A

future movements in consumer prices

70
Q

the current standard base “year” for the CPI is an average of 1982-1984 prices. values like wages in current-year dollars are called

A

nominal variables

71
Q

if we take the nominal variable and adjust it for inflation

A

real variable

72
Q

the salary of $35,000 from 1999 would be

A

$53,709 in 2019

73
Q

a $1,000 loan paid back in a year will be paid back with 6% interest would be

A

$1,060

74
Q

real interest=

A

nominal interest rate- inflation rate

75
Q

if there is 6% nominal interest rate, if prices rise by 2% from this year to next, then what is the real interest rate

A

6%-2%=4%

76
Q

in 2009, the real interest rate was above the nominal interest rate means the

A

CPI was negative then, indicating a rare deflation, or decrease in the price level

77
Q

how does inflation affect the distribution of income and wealth

A

unlikely that everyone’s wages would increase at the same rate
many people have long-term contracts with wages in nominal terms
cash is a nominal asset, if you a lot of cash, then inflation causes a decrease in your real wealth

ECON 104 (12 decks)

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