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ECON 104 > Chapter 9 > Flashcards

Chapter 9 Flashcards

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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
advantages of establishment survey
data is determined by actual payroll, not self-reporting like the household survey
26
we do not expect the numbers to be identical between the two survey's because
different groups are measured all surveys have measurement errors
27
frictional unemployment
"not bad" occurs mostly because of job search: entering or re-entering the labor force or in between jobs
28
seasonal unemployment
some jobs fluctuate in availability due to seasonal demand
29
to control seasonal unemployment, the BLS releases raw and seasonally adjusted employment which
some frictional unemployment actuals increases economic efficiently by allowing for better job matches
30
structural unemployment
unemployment that arises from a persistent mismatch between the skills and attributes of workers and the requirements of jobs
31
examples of structural unemployment
VCR repairman is unemployed today -need retraining in order to get "modern" jobs
32
cyclical unemployment
unemployment causes by a business cycle recession (in normal recoveries after a recession, unemployment due to cyclical factors will fail)
33
full employment
when all unemployment is due to frictional and structural factors (always some type of unemployment)
34
natural rate of unemployment
the normal rate of unemployment, consisting of frictional unemployment and structural unemployment between 5%-6%
35
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
structural unemployment
36
what type of unemployment is this trying to reduce: subsidize new hires
frictional unemployment
37
government policies that increase unemployment
unemployment insurance "extreme" minimum wage laws
38
if unemployment insurance payments are available and you just lost your job
you will be more likely to search for a better job than just taking the first job you see
39
economists believe that high unemployment rates correspond
with more generous unemployment insurance
40
minimum wage laws are designed to help low-income workers; but
at some point, raising the wage that firms must pay will result in them hiring fewer workers
41
relatively few full-time adults earn minimum wage, the group most likely to receive minimum wage is
teenagers
42
unemployment only causes small
wage increases and that with a 10% increase, only 2% reduce teenage employment
43
labor unions goal
bargain with employers for higher wages and better working conditions
44
union workers are probably not
a significant cause of unemployment in US
45
efficiency wage
an above-market wage that a firm pays to increase workers' productivity
46
why would a firm pay workers wages that are higher than the market wage?
motivated to perform well and keep job reduces turnover and costly hiring
47
above-market wages may make
frictional unemployment longer -firm won't hire as many people as quickly due to higher wages
48
price level
a measure of the average prices of goods and services in the economy
49
inflation rate
the % increase in the price level from one year to the next
50
two commonly-used measures
1. the consumer price index (CPI) 2. the producer price index (PPI)
51
consumer price index
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
what you need to calculate CPI in a given year
1. a "basket" of goods 2. fixed quantity from base year 3. prices from current and base years
53
cpi=
expenditures in the current year/expenditures in the base year x 100
54
inflation rate is calculated through
percentage change formula
55
two measures of inflation
GDP deflator and CPI
56
To use the GDP deflator
need to find nominal and real GDP in each year, and take the percentage change of the GDP deflator to find inflation
57
economic growth is typically measured by changes in real GDP per capita over time and want
to measure production and output changes (NOT price increaes)
58
CPI is NOT
looking at production, just at price increases of the "basket"
59
CPI just includes
consumer prices -not government purchases
60
if you want to get a measure of how inflation affects your daily spending,
use CPI (also known as cost of living index)
61
CPI inflation is sometimes used to
generate "fair" increases in wages and government benefits
62
substitution bias
consumers may change their purchasing habits, not buy as many goods if price is higher
63
increase in quality bias
products like cars and computers have become more durable and better quality over time
64
new product bias
the basket of goods changes only every 10 years
65
example of new product bias
streaming services
66
outlet bias
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
for the biases, economists believe that
CPI overstates true inflation by 0.5 to 1 percentage points
68
producer price index
an average of the prices received by producers of goods and services at all stages of the production process
69
PPI can give an early warning of
future movements in consumer prices
70
the current standard base "year" for the CPI is an average of 1982-1984 prices. values like wages in current-year dollars are called
nominal variables
71
if we take the nominal variable and adjust it for inflation
real variable
72
the salary of $35,000 from 1999 would be
$53,709 in 2019
73
a $1,000 loan paid back in a year will be paid back with 6% interest would be
$1,060
74
real interest=
nominal interest rate- inflation rate
75
if there is 6% nominal interest rate, if prices rise by 2% from this year to next, then what is the real interest rate
6%-2%=4%
76
in 2009, the real interest rate was above the nominal interest rate means the
CPI was negative then, indicating a rare deflation, or decrease in the price level
77
how does inflation affect the distribution of income and wealth
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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