Term
| Who is in the labor force: |
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Definition
Employed-- people who worked more than 1 hour last week, or temporarily off work
Unemployed--people who were laid off last week or have looked for a job in the last month. |
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Term
| Who is not in the labor force: |
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Definition
Full time students
Retirees
Home Makers
Discouraged Workers |
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Term
| How is the unemployment rate determined: |
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Definition
measures the percentage of the labor force that is unemployed.
Number of employed/labor force X 100
6.8mill/ 152.6 mill X 100 = 4.5% |
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Term
| What are the Three Types of Unemployment: |
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Definition
Structural
Frictional
Cyclical |
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Term
| What is Structural unemployment |
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Definition
| form of unemployment resulting from a mismatch between the sufficiently skilled workers seeking employment and demand in the labor market. |
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Term
| What is frictional unemployment |
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Definition
short term unemployment that arises from the process of matchign workers to jobs
1) new entrants in job market
2) people between jobs |
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Term
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Definition
| unemployment caused by the business cycle: recession. |
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Term
| Relationship between full employment and unemployment |
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Definition
| 1) we are full employed when the economy only has structural and frictional unemployment. -- this is also the natural rate of unemployment |
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Term
| Problems with Unemployment rate: |
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Definition
1) discouraged workers not included
2) involuntary part timers are included as full time workers
3) illegal activites |
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Term
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Definition
| average of the prices of the goods and services purchased by a typical household of 4 in same base period. |
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Term
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Definition
| cost of market basket in current year/ cost of market basket in base year X 100 |
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Term
| How is CPI different from GDP |
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Definition
i. GDP is the market value of goods
i. CPI is the average price of household goods |
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Term
| Calculate inflation rate with CPI |
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Definition
| Current cpi – last periods cpi / last period cpi X 100 |
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Term
| How does CPI mis state true inflation |
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Definition
1) substitution Bias
2) Increase in Quality Bias
3) New Product Bias
4) Outlet Bias |
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Term
| Consequences of overstating CPI |
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Definition
| Includes cost of living but ignores improved standards |
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Term
| CPI is used to translate nominal values into real values by: |
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Definition
| the CPI in current/ cpi in base X value of dollars in previous year to = the value in dollar now. |
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