Class Chapt 7

Question 1

Why unemployment is a problem?

Answer 1

• Lost incomes and production
• Lost human capital

Question 2

Which is working-age population?

Answer 2

the total number of people aged 15 years and over

Question 3

How does the working-age population is divided?

Answer 3

1. People in the labour force
2. People not in the labour force

Question 4

who is considered unemployed?

Answer 4

1. On temporary layoff
2. Without work but searching for a job within the previous 4 weeks
3. Has a new job to start within four weeks.

Question 5

What are the 4 Labour Market Indicators?

Answer 5

1. The unemployment rate
2. Involuntary part-time rate
3. The labour force participation rate
4. The employment rate

Question 6

How to calculate unemployment rate?

Answer 6

(Number of people unemployed ÷ labour force) *100.

Question 7

In a recession, unemployment increases or decreases?

Answer 7

Increases

Question 8

How to calculate the involuntary part-time rate is?

Answer 8

(Number of involuntary part-time workers ÷ Labour force) *100

Question 9

How to calculate the labour force participation rate?

Answer 9

(Labour force ÷ Working-age population) × 100.

Question 10

What is the Labour force participation rate?

Answer 10

is the percentage of the working-age population who are members of the labour force

Question 11

What is the employment rate?

Answer 11

is the percentage of the working-age population who have jobs.

Question 12

How to calculate the employment rate?

Answer 12

(Employment ÷ Working-age population) *100.

Question 13

Why does the labour force participation increased a lot before 1990?

Answer 13

Because women participated in the labour force.

Question 14

Who is not included in the unemployment rate?

Answer 14

1.Discouraged searchers
2.Long-term future starts
3. involuntary part-timers

Question 15

How can Unemployment be classified?

Answer 15

• Frictional unemployment (good)
• Structural unemployment (necessary)
• Cyclical unemployment (not good)

Question 16

What is frictional unemployment?

Answer 16

it appears by the creation and destruction of jobs, it is permanent and healthy.

Question 17

How does structural unemployment happens?

Answer 17

With changes that require different skills needed to perform jobs.

Question 18

What is full employment?

Answer 18

when there is no cyclical unemployment, only frictional and structural.
unemployment = Natural employment

Question 19

What is potential GDP

Answer 19

is the quantity of real GDP produced at full employment.

Question 20

what is the output gap?

Answer 20

Real GDP minus potential GDP

Question 21

Why is unpredictable inflation or deflation bad?

Answer 21

-Redistributes income and wealth
-Lowers real GDP and employment
-Diverts resources from production

Question 22

What does CPI stands for?

Answer 22

Consumer Price Index

Question 23

What is the Consumer Price Index?

Answer 23

Measures the average price paid by urban consumers for certain goods and services. to know the cost of living now compared to the past.

Question 24

What is the 3 largest components in the basket?

Answer 24

1.Shelter
2.Transportation
3.Food and beverage

Question 25

How does the CPI is calculated?

Answer 25

Cost of basket at current-period prices ÷ Cost of basket at base-period prices) * 100 (the result minus 100)

Question 26

What is the Inflation rate?

Answer 26

is the percentage change in the price level from one year to the next.

Question 27

How does the Inflation rate is calculated?

Answer 27

[(CPI this year − CPI last year) ÷ CPI last year] * 100

Question 28

4 reasons for the CPI bias?

Answer 28

-New goods bias -Quality change bias -Commodity substitution bias -Outlet substitution bias

Question 29

What are the alternatives for measuring prices?

Answer 29

-GDP deflator -Chained price index for consumtion (CPIP)

Question 30

How to get the GDP deflator?

Answer 30

(Nominal GDP ÷ Real GDP)* 100

Question 31

The labour force is the total number of ?

Answer 31

A) people employed. B) people aged 15 years and over. C) people in the working-age population who are employed. D) people in the working-age population who are either employed or unemployed

Question 32

Give an example of cyclical unemployment

Answer 32

A person that has been laid off but expects to be called back in a few weeks, just as soon as the economy improves.

Question 33

What happens When real GDP is above potential GDP?

Answer 33

there is less than normal frictional, structural, and seasonal unemployment.

Question 34

A positive inflation rate means that average prices in the economy are?

Answer 34

Rising

Question 35

The basket used to calculate the Consumer Price Index (CPI) assumes that over time consumers?

Answer 35

Buy the same quantities of products no matter how prices change.

Question 36

Inflation formula:

Answer 36

(CPI now - CPI Past / CPI past) *100