Exam 20: Unemployment and Inflation

Table 20-20 Salaries in major league baseball have soared over the last 30 to 40 years. Some of the salary increase is due to inflation. The table above reports the consumer price index and the median nominal salary of the New York Yankees for 1989 and 2015. Source: USA Today Salaries Database, http://www.usatoday.com/sports/mlb/yankees/salaries/2015/team/all/ -Refer to Table 20-20. Calculate the real median salary of the New York Yankees in both 1982-1984 dollars and 2015 dollars. Calculate the percentage increase in the median salary of the Yankees from 1989 to 2015 in both nominal terms and in real terms.

The unemployment rate equals the number of unemployed divided by the ________, all times 100.

Eliminating frictional unemployment would be good for the economy.

Table 20-17 -Refer to Table 20-17. Looking at the table above, real average hourly earnings between 2017 and 2018 changed by

The percent increase in the CPI from one year to the next is a measure of the

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

Table 20-9 -Refer to Table 20-9. Suppose that the data in the table above reflect the price levels in the economy. Given that data, we can say that the cost of living rose by ________ between 2017 and 2018?

To obtain real average hourly earnings, nominal average hourly earnings are multiplied by the CPI.

You lend $5,000 to a friend for one year at a nominal interest rate of 10%. Inflation during that year is 5%. As a result, you will receive ________ at the end of the year, but that money has a purchasing power of ________.

The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.

What are the three main types of unemployment?

If the number employed is 190 million, the working-age population is 230 million, and the number unemployed is 10 million, then the unemployment rate is

You lend $5,000 to a friend for one year at a nominal interest rate of 10%. The CPI over that year rises from 180 to 190. What is the real rate of interest you will earn?

You borrow $10,000 from a bank for one year at a nominal interest rate of 5%. The CPI over that year rises from 180 to 200. What is the real interest rate you are paying?

When the labor market is at full employment

In recent years, economists have come to rely more on the establishment survey rather than the household survey to analyze current labor market statistics.

Table 20-11 -Refer to Table 20-11. Suppose an economy has only three goods and the typical family purchases the amounts given in the table above. If 2013 is the base year, then what is the CPI for 2018?

How would the unemployment rate and the labor force participation rate change if discouraged workers were counted as unemployed rather than counted as not in the labor force? Show using the formula for both measurements.

Table 20-4 -Refer to Table 20-4. Assume the market basket for the consumer price index has two products-meat and potatoes-with the following values in 2013 and 2018 for price and quantity: The Consumer Price Index for 2018 equals

Most economists believe that the biases in the consumer price index cause the CPI to overstate the true inflation rate by about