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Chapter 9
Macro Midterm #1
| Term | Definition |
|---|---|
| Employed | People that worked during the week prior to the household survey. |
| Unemployed | People that didn't work in the week prior to the household survey and were actively seeking work. |
| Discouraged Workers | People that didn't work in the week prior to the household survey and did not seek employment in the last 4 weeks. |
| Civilian Labor Force = | Employed + Unemployed |
| U= | (# of Unemployed Workers/Civilian Labor Force)*100 |
| Labor Force Participation Rate | The percentage of the working-age (16 and over) non-institutional population in the labor force. |
| LFPR= | (Labor Force/Working Age Population)*100 |
| Pros of the Establishment Survey | Based on actual payroll data |
| Cons of the Establishment Survey | 1. No information on the self-employed 2. New firms may not be surveyed 3. No information on the unemployed |
| Frictional Unemployment | The short-term unemployment that rises from the process of matching workers with jobs. |
| Structural Unemployment | Unemployment arising from a persistent mismatch between the skills and attributes of workers and the requirements of jobs |
| Cyclical unemployment | Unemployment caused by a business cycle recession. |
| Full Employment(U*)= | Frictional + Structural Employment |
| Efficiency Wages | A higher-than-market wage that a firm pays to increase worker productivity |
| Consumer Price Index (CPI) | An average of the prices of the goods and services purchased by the typical urban family of four, or a measure of the overall average price level faced by consumers. |
| Expenditures= | P*Q(base year) |
| CPI= | (Expenditures in the current year/expenditures in the base year)*100 |
| Inflation rate (π)= | %change in CPI |
| Value in Year X dollars = | Value in Year Y dollars*(CPI in Year X/CPI in Year Y) |
| Substitution bias | Consumers change their consumption patterns when relative prices change |
| Increase in Quality Bias | Higher prices are due to both increases in quality and prices |
| New Product Bias | New products tend to have higher prices, then fall over time. |
| Outlet Bias | The BLS was using "full-priced" stores, now they include outlets and club shopping. |
| The Producer Price Index (PPI) | An average of the prices received by producers of goods and services at all stages of the production process. |
| Nominal Interest Rate (i) | The stated interest rate on a loan, for example the interest rate advertised by a car dealer. |
| Real Interest Rate (r) | The nominal interest rate minus the inflation rate |
| What is a cost of anticipated inflation? | There will be some redistribution of income as some wages rise faster than inflation and others do not. |
| Tax effect | Investors are taxed on nominal increases, not real increases. |
| Shoe leather costs | People will hold as little as possible to avoid the effect of inflation, resulting in more frequent trips to the bank, etc. |
| Menu Costs | Firms must update catalogs, price lists, etc. |
Created by:
cindysmile79
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