Economics Chapter 22: Unemployment and Growth
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Questions and Answers

What does productivity growth specifically measure?

  • The growth rate of per-capita income
  • The growth rate of output per worker (correct)
  • The overall growth rate of the labor force
  • The growth rate of total economic output

Which statement about capital per worker is true based on the data provided?

  • Capital per worker showed significant growth until around 1980 (correct)
  • Capital per worker has continually increased since 1952
  • Capital per worker has decreased steadily since 1952
  • There was no change in capital per worker post-1980

Which term describes the growth rate of output for the entire economy?

  • Output growth (correct)
  • Productivity growth
  • Per-capita output growth
  • Multiplier effect

During which decades did productivity experience much faster growth?

<p>1950s and 1960s (C)</p> Signup and view all the answers

What equation best describes the relationship between labor force components?

<p>Labor force = employed + unemployed (A)</p> Signup and view all the answers

In 2010, what was the average duration of unemployment in weeks?

<p>39.4 (C)</p> Signup and view all the answers

Which year had the highest recorded average duration of unemployment in the table?

<p>2011 (A)</p> Signup and view all the answers

What was the labor force participation rate of women in 1955?

<p>36% (B)</p> Signup and view all the answers

What was the approximate percentage decline in men's labor force participation from 1955 to 1996?

<p>15% (B)</p> Signup and view all the answers

In which year was the average duration of unemployment 20.0 weeks?

<p>1983 (B)</p> Signup and view all the answers

How did the duration of unemployment in 2001 compare to 2004?

<p>2004 had a longer duration. (C)</p> Signup and view all the answers

What effect does contracting out household cleaning services have on GDP according to the content?

<p>GDP increases due to higher wages paid to the worker. (C)</p> Signup and view all the answers

What trend was observed in women's labor force participation between 1955 and 1996?

<p>It increased significantly. (A)</p> Signup and view all the answers

What was the Consumer Price Index (CPI) in 1980?

<p>82.4 (D)</p> Signup and view all the answers

Which year saw the highest percentage change in CPI from the provided data?

<p>1979 (C)</p> Signup and view all the answers

What was the percentage change in CPI for the year 2011?

<p>3.1 (D)</p> Signup and view all the answers

In which year did the CPI first exceed 200?

<p>2005 (C)</p> Signup and view all the answers

Between which years did the CPI experience a decline?

<p>2009 and 2010 (A)</p> Signup and view all the answers

What was the CPI for the year 1965?

<p>31.5 (D)</p> Signup and view all the answers

Which of the following years had a CPI value of 236.7?

<p>2014 (A)</p> Signup and view all the answers

What was the percentage change in CPI from 2006 to 2007?

<p>2.8 (C)</p> Signup and view all the answers

What percentage of lost market hours is attributed to nonmarket work such as cleaning and child care?

<p>35% (C)</p> Signup and view all the answers

Which demographic group had the highest unemployment rate in November 1982?

<p>Both sexes 16–19 (C)</p> Signup and view all the answers

What is the discouraged-worker effect?

<p>A decline in unemployment measurement due to discouraged job seekers. (B)</p> Signup and view all the answers

What percentage of lost market hours is spent on job search?

<p>2%–6% (D)</p> Signup and view all the answers

Which of the following statements is likely true during a boom time regarding the unemployed?

<p>More time is dedicated to job searching. (A)</p> Signup and view all the answers

Which age group showed the largest decrease in unemployment rates from 1982 to 2015?

<p>Both sexes 16–19 (D)</p> Signup and view all the answers

What typically happens to those classified as discouraged workers?

<p>They stop looking and drop out of the labor force. (C)</p> Signup and view all the answers

In March 2015, which group had the lowest unemployment rate?

<p>Women 20+ (B)</p> Signup and view all the answers

What does the Consumer Price Index (CPI) represent?

<p>A calculation of average prices paid by urban consumers for a market basket of goods. (D)</p> Signup and view all the answers

Which of the following categories typically receives the largest portion of consumer spending according to the CPI market basket?

<p>Transportation (C)</p> Signup and view all the answers

What organization is responsible for calculating the Consumer Price Index?

<p>The Bureau of Labor Statistics (C)</p> Signup and view all the answers

Producer Price Index (PPI) measurement primarily focuses on which aspect?

<p>Prices received by producers at different stages of production. (A)</p> Signup and view all the answers

What was the percentage change in CPI from 1950 to 1951?

<p>7.9% (D)</p> Signup and view all the answers

What is frictional unemployment primarily associated with?

<p>Short-run job/skill-matching problems (C)</p> Signup and view all the answers

Based on the CPI table, which year showed the highest percentage change in CPI?

<p>1974 (A)</p> Signup and view all the answers

Which of the following is NOT included in the typical CPI market basket?

<p>Farming equipment (B)</p> Signup and view all the answers

Which category of unemployment is expected to increase during economic downturns?

<p>Cyclical unemployment (D)</p> Signup and view all the answers

In which year did the CPI first exceed a value of 50 according to the table?

<p>1975 (B)</p> Signup and view all the answers

How is the natural rate of unemployment defined in relation to other types of unemployment?

<p>It is the sum of frictional and structural unemployment rates. (A)</p> Signup and view all the answers

What social consequence was a result of the Great Depression in the 1930s?

<p>Many individuals lost their savings due to bank failures (C)</p> Signup and view all the answers

What is structural unemployment primarily the result of?

<p>Changes in the economy that affect certain industries (B)</p> Signup and view all the answers

How did the recession of 2008–2009 affect young college graduates?

<p>They experienced prolonged periods of unemployment (A)</p> Signup and view all the answers

Which of the following best describes cyclical unemployment?

<p>It is linked to trends in gross domestic product (GDP). (A)</p> Signup and view all the answers

Apart from economic factors, what can complicate the measurement of unemployment costs?

<p>The social consequences being unevenly distributed (B)</p> Signup and view all the answers

Flashcards

Discouraged-Worker Effect

The tendency for the measured unemployment rate to decline when workers who have been searching for jobs become discouraged and stop looking. This is because they are no longer considered unemployed by the BLS.

Unemployment Rate

A measure of the total percentage of the workforce who are actively seeking jobs but are unable to find employment. Includes only those actively looking for work.

Boom Time

A situation where the economy is experiencing high levels of growth and demand for workers.

Nonmarket Work

The activities that individuals engage in when they are not working, such as leisure, education, or household work.

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Job Search Time

The amount of time that individuals spend searching for new employment opportunities.

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Activities Tied to Longer Job Placement

The time spent on activities related to job placement, like training or education. This time is longer in weaker labor markets.

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Unemployment Rate

The percentage of individuals in the labor force who are unemployed and actively searching for jobs.

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Unemployed

A snapshot of the individuals in the labor force who are actively seeking employment but unable to find suitable positions.

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Average Duration of Unemployment

The average length of time a person remains unemployed. Calculated by dividing the total weeks of unemployment by the number of unemployed individuals.

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Labor Force Participation Rate

The percentage of the working-age population that is either employed or actively seeking employment.

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Women in the Labor Force

The proportion of women in the labor force increased significantly from 1955 to 1996, while the proportion of men decreased.

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Gross Domestic Product (GDP)

A measure of the total value of goods and services produced in an economy. It considers all final goods and services produced within a specific period.

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Economic Output and GDP

When someone pays for a service they previously provided for themselves, it can increase GDP. However, the actual economic output may not necessarily be larger.

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Unemployed Individual

An individual who is actively seeking employment but is currently without a job.

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Aggregate Supply

The overall supply of goods and services that can be produced at various price levels.

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Aggregate Demand

The total demand for goods and services at different price levels.

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Frictional Unemployment

Unemployment caused by temporary or seasonal factors, like graduating students seeking their first job or people switching careers.

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Structural Unemployment

Unemployment caused by long-term changes in industry structure, like automation replacing jobs. It's harder to find new work because skills are no longer in demand.

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Cyclical Unemployment

Unemployment that occurs during periods of economic downturn or recession. It's higher than normal due to a decline in overall economic activity.

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Natural Rate of Unemployment

The normal level of unemployment in an economy, composed of frictional and structural unemployment. It's the unavoidable base level of unemployment.

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Social Consequences of Unemployment

The costs of unemployment are widespread and not easily measured. It includes lost income, reduced production, and social problems like poverty and crime.

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The Great Depression

The Great Depression was a time of widespread and severe unemployment. It led to poverty, social unrest, and long-term economic hardship.

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Wage Effects of Recession

Even after the Great Recession, wages for those who experienced unemployment remained lower than those who stayed employed, pointing to lasting scars.

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Mechanism of Wage Persistence

The persistence of wage effects after a recession likely stems from a combination of factors like diminished skills, reduced productivity, and employer bias against those who were previously unemployed.

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Output Growth

The growth rate of the total output of the economy, indicating how quickly the economy is producing goods and services.

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Per-Capita Output Growth

The growth rate of output per person in the economy, showing how much each individual's share of the economic output is increasing.

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Productivity Growth

The growth rate of output per worker, measuring how efficiently labor is being used to produce goods and services.

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Capital Per Worker

The measurement of how much capital (machines, buildings, etc.) each worker has to work with, reflecting the level of technology and infrastructure.

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Inflation

The statistic that measures the rate at which prices are increasing in an economy.

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What is the Consumer Price Index (CPI)?

A price index that measures the average change in prices paid by urban consumers for a basket of goods and services.

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What does the 'CPI Market Basket' represent?

The CPI market basket represents the typical spending patterns of urban consumers, showing how their money is allocated across various goods and services.

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What are Producer Price Indexes (PPIs)?

A set of price indexes that measure the average change in prices received by domestic producers for their output at various stages in the production process.

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How is the CPI calculated?

The CPI is calculated by comparing the cost of a fixed basket of goods and services in a given period to the cost of the same basket in a base period.

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Define inflation and deflation.

Inflation is a general increase in the price level of goods and services over time, while deflation is a general decrease in the price level.

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What are some causes of inflation?

Inflation can be caused by a variety of factors, including an increase in the money supply, increased demand, and supply shocks.

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What are some causes of deflation?

Deflation can be caused by a decrease in the money supply, decreased demand, and technological advancements.

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What are the potential impacts of inflation and deflation on the economy?

Inflation and deflation can have significant impacts on the economy, including changes in consumer spending, investment, and interest rates.

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What does the CPI measure?

The CPI is a weighted average of prices for a basket of goods and services that are representative of the spending patterns of urban consumers in the United States.

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Who calculates the CPI and what is it used for?

The CPI is calculated by the Bureau of Labor Statistics (BLS) and is used as a measure of inflation. It is a leading economic indicator, providing insights into the health of the economy.

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How is the CPI used?

The CPI is used to adjust wages, benefits, and other payments for inflation. It is also used to calculate the inflation-adjusted value of economic statistics, such as GDP.

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Why is the CPI a valuable tool?

The CPI is a valuable tool for understanding the impact of inflation on the economy and for making informed decisions about investments, spending, and saving.

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What is the basis of the CPI?

The CPI is based on a fixed basket of goods and services that is representative of the spending patterns of urban consumers. It is not a perfect measure of inflation, but it is widely used and accepted by economists.

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Why is the CPI important?

The CPI is a valuable tool for understanding the impact of inflation on consumers and the economy. It is used to adjust wages, benefits, and other payments for inflation, and to make informed decisions about investments, spending, and saving.

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What is the CPI in simple terms?

The CPI is a statistical measure used to measure the average change in prices paid by urban consumers over time. It provides insights into the cost of living and is a valuable tool for monitoring inflation and making informed economic decisions.

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Study Notes

Chapter 22: Unemployment, Inflation, and Long-Run Growth

  • The unemployment rate and inflation are key macroeconomic variables.
  • The U.S. Bureau of Labor Statistics (BLS) releases the monthly unemployment rate and consumer price index (CPI).
  • Macroeconomics often focuses on business cycles, but long-run growth is also crucial.

Measuring Unemployment

  • Employed: A person aged 15 or older who works for pay (for someone else or themself), 1+ hours/week, or works without pay for 15+ hours in a family enterprise, or is temporarily absent from a job with or without pay.
  • Unemployed: A person aged 15 or older who is not working, is available for work, and has actively looked for work in the past 4 weeks.
  • Not in the labor force: A person who is not looking for work, either because they don't want a job or have given up looking.
  • Labor force: The total number of employed people plus the unemployed.
  • Population: The labor force plus those not in the labor force.
  • Unemployment rate: The ratio of unemployed people to the total labor force.
  • Labor force participation rate: The ratio of the labor force to the total population (aged 16+).

Components of the Unemployment Rate

  • Discouraged-worker effect: A decline in the measured unemployment rate due to individuals who want to work but are discouraged from job searching and drop out of the labor force.
  • BLS survey: Individuals who cite only the inability to find employment as the reason for not searching for work may be categorized as discouraged workers.

The Costs of Unemployment

  • Unemployment costs are not evenly distributed and not easily quantifiable.
  • The Great Depression of the 1930s provides a hard example of the social consequences of unemployment.
    • A significant portion of the labor force (about 25%) was fully unemployed at the time.
    • Many people lost savings due to the stock market crash and bank failures.
    • Even those who kept jobs often worked part-time.

The Kinds of Unemployment

  • Frictional unemployment: Job/skill matching problems that result from the normal turnover in the labor market.
  • Structural unemployment: Unemployment due to changes in the economy's structure, resulting in significant job losses in specific sectors.
  • Cyclical unemployment: Unemployment that occurs during economic recessions or depressions.
  • Natural rate of unemployment: The unemployment rate that is part of a functioning economy; it often represents the sum of frictional and structural unemployment rates.

Inflation and Deflation

  • Consumer price index (CPI): A monthly price index calculated by the BLS using a bundle of goods (the market basket) that a typical urban consumer buys.
  • Producer Price Indexes (PPIs): Measures of prices that producers receive for products at all stages of the production process.
  • Inflation: A generalized increase in the prices of most goods and services in an economy.
    • Often, wages and input prices tend to increase simultaneously.
    • This rise in prices, doesn't necessarily lead to a reduction in purchasing power.
  • Deflation: A generalized decrease in the price of most goods and services in an economy.

Long-Run Growth

  • Output growth: The rate at which the entire economy's output is growing.

  • Per-capita output growth: The growth rate of output per person in the economy.

  • Productivity growth: The rate at which output per worker is growing.

  • Historically, output and productivity growth was higher in the 1950s and 1960s compared to later periods. Output per worker-hour increased, but not as significantly since the 1970s.

  • Capital per worker grew until about 1980, and then remained relatively stable.

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Principles of Economics Twelfth Edition Chapter 22 PDF

Description

Explore the dynamics of unemployment and inflation in this quiz based on Chapter 22 of your economics curriculum. Understand key concepts such as labor force definitions and the significance of long-run economic growth. Test your knowledge of macroeconomic variables and their impact on the economy.

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