Exam 20: Unemployment and Inflation

Why does the substitution bias cause the consumer price index to overstate inflation and the cost of living? Why does the increase in quality bias cause the consumer price index to overstate inflation and the cost of living?

Describe the three types of unemployment.

Suppose you borrow $1,000 at an interest rate of 12 percent. If the expected real interest rate is 5 percent, then the rate of inflation over the upcoming year that would be most beneficial to you would be a rate of inflation

The natural rate of unemployment consists of frictional unemployment plus cyclical unemployment.

In the modern U.S. economy, the typical unemployed person stays unemployed for

The natural rate of unemployment is the amount of unemployment

If inflation is positive and is perfectly anticipated,

When deflation occurs,

Suppose 180,000 people are employed, 20,000 people are unemployed, and 50,000 people are out of the labor force, then calculate the labor force participation rate.

Imagine that you borrow $1,000 for one year and at the end of the year you repay the $1,000 plus $100 of interest. If the inflation rate was 7%, what was the real interest rate you paid?

Jack lost his job six months ago, and he's been actively looking for a new job ever since. The Bureau of Labor Statistics would classify Jack as

Which of the following is an example of a worker experiencing cyclical unemployment?

List three different price indices and explain how they differ in terms of the market basket on which they are based.

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called

The increase in quality bias in the consumer price index refers to the idea that price increases in the CPI reflect pure inflation, but ________ quality increases. This causes the CPI to ________ the cost of the market basket.

If firms pay what are called "efficiency wages," they pay wages that

The household survey is compiled from firms who answer questions about the number of persons who are employed and on the company payroll.

The costs to firms of changing prices are called menu costs.

Table 20-5 -Refer to Table 20-5. Consider the following values of the consumer price index for 2012 and 2013. The inflation rate for 2013 was equal to

The nominal interest rate plus the inflation rate equals the real interest rate.