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Exploring Macroeconomics 7th Edition Robert L. Sexton - Solutions
Retirees on fixed pensions, creditors, and those whose incomes are tied to long-term contracts can be hurt by inflation because inflation ___________________ the purchasing power of the money they receive.
While the CPI and the GDP deflator move together, the CPI tends to be ___________________ volatile.
A price index is equal to the cost of the chosen market basket in the ___________________ year, divided by the cost of the same market basket in the ___________________ year, times 100.
The CPI is the price index that is most relevant to ___________________ trying to evaluate their changing financial position over time.
The GDP deflator measures the average level of prices of all ___________________ goods and services produced in the economy.
The best-known price index is the ___________________, which provides a measure of the trend in the prices of goods and services purchased for consumption purposes.
We must adjust for the changing purchasing power of the dollar by constructing a price __________________.
The ___________________ is the standard measure of inflation.
In general, the only thing that can cause a sustained increase in the rate of inflation is a(n)___________________ rate of growth in money.
Without price stability, consumers and producers will experience more difficulty in ___________________ their plans and decisions.
The economy can ___________________ exceed potential output as workers put in overtime or moonlight by taking on extra employment.
When the economy is experiencing cyclical unemployment, the unemployment rate is ___________________ than the natural rate.
When all of the economy’s labor resources and other resources, such as capital, are fully employed, the economy is said to be producing its ___________________ level of output.
The natural rate of unemployment may change over time as ___________________, ___________________, ___________________, and other conditions vary.
The natural rate of unemployment is the median, or“typical,” unemployment rate, equal to the sum of ___________________ and ___________________ unemployment when they are at a maximum.
One can view unemployment rates below the ___________________ rate as reflecting the existence of a below-average level of frictional and structural unemployment.
The natural rate of unemployment roughly equals the sum of ___________________ and ___________________ unemployment when they are at a maximum.
Job retraining programs have the potential to reduce ___________________ unemployment.
Most of the attempts to solve the unemployment problem have placed an emphasis on increasing ___________________.
___________________ unemployment is the most volatile form of unemployment.
___________________ unemployment reflects the existence of persons who lack the necessary skills for jobs that are available.
If individuals seeking jobs and employers seeking workers had better information about each other, the amount of frictional unemployment would be considerably ___________________.
Frictional unemployment tends to be somewhat ___________________ in periods of low unemployment, when job opportunities are plentiful.
Frictional unemployment is ___________________ term and results from the ___________________ turnover in the labor market.
The percentage of the population that is in the labor force is called the ___________________ rate.
The duration of unemployment tends to be greater when the amount of unemployment is ___________________ and smaller when the amount of unemployment is ___________________.
Trying to match employees with jobs quickly may lead to significant inefficiencies because of ___________________ between a worker’s skill level and the level of skill required for a job.
In the short run, a reduction in unemployment may come at the expense of a higher rate of ___________________, especially if the economy is close to full capacity.
___________________ typically account for the largest fraction of those unemployed.
The four main categories of unemployed workers include job ___________________ (temporarily laid off or fired), job ___________________ (quit), ___________________(worked before and now reentering the labor force), and ___________________ (entering the labor force for the first time).
Some people working overtime or extra jobs might be considered to be ___________________ employed.
___________________ workers, who have not actively sought work for 4 weeks, are not counted as unemployed; instead, they fall out of the ___________________.
The labor force is the number of people over the age of 16 who are either ___________________ or ___________________.
The unemployment rate is the number of people officially ___________________ divided by ___________________.
With high rates of unemployment, society loses some potential ___________________ of goods and services.
Macroeconomists develop models that attempt to explain and predict the impact of economic policies on ___________________, ___________________ and the ___________________.
Three major macroeconomic goals are maintaining employment at ___________________ levels; maintaining prices at a(n) ___________________ level; and achieving a(n) ___________________ rate of economic growth.
Why might the unemployment rate fall after output starts recovering during the expansion phase of the business cycle?
Why is the output of investment goods and durable consumer goods more sensitive to the business cycle than that of most goods?
Why would you expect unemployment to fall during an economy’s expansionary phase and to rise during a contractionary phase?
Which of the following is true?a. In an expansion, investment is rising, but expenditures for expensive durable consumer goods are falling.b. A contraction is a period of falling real output and is usually accompanied by rising unemployment and declining business and consumer confidence.c.
The contractionary phase of the business cycle is characterized bya. reduced output and increased unemployment.b. reduced output and reduced unemployment.c. increased output and increased unemployment.d. increased output and reduced unemployment.
In the contraction phase of the business cycle,a. output is rising.b. unemployment is falling.c. consumer and business confidence are high.d. investment is rising.e. none of the above is true.
A business cycle reflects changes in economic activity, particularly real GDP. The stages of a business cycle in order area. expansion, peak, contraction, and trough.b. expansion, trough, contraction, and peak.c. contraction, recession, expansion, and boom.d. trough, expansion, contraction, and
What is the difference between a recession and a depression?
What are the four stages of a business cycle?
What are short-term economic fluctuations?
How could inflation make people turn to exchange by barter?
Why will neither creditors nor debtors lose from inflation if it is correctly anticipated?
How does a variable interest rate loan “insure” the lender against unanticipated increases in inflation?
Say you owe money to Big River Bank. Will you gain or lose from an unanticipated decrease in inflation?
What will happen to the nominal interest rate if the real interest rate rises, ceteris paribus? What if inflation increases, ceteris paribus?
Why doesn’t the CPI accurately adjust for the cost-of-living effects of a tripling in the price of bananas relative to the prices of other fruits?
Why would the CPI take into account some goods imported from other countries, but not take into account some goods produced domestically, unlike the GDP deflator?
Why does the CPI tend to overstate inflation if the quality of goods and services is rising over time?
How does price-level stability reduce the difficulties buyers and sellers have in coordinating their plans?
If the nominal interest rate is 9 percent and the inflation rate is 3 percent, the real interest rate isa. 3 percent.b. 6 percent.c. 9 percent.d. 12 percent.e. 27 percent.
The costs of inflation includea. menu costs.b. shoe-leather costs.c. a distortion of price signals.d. all of the above.
Unexpected inflation generally benefitsa. lenders.b. borrowers.c. the poor.d. people on fixed incomes.
Inflation will be least harmful ifa. interest rates are not adjusted accordingly when inflation occurs.b. worker wages are set by long-term contracts.c. it is correctly anticipated and interest rates adjust accordingly.d. it is not fully anticipated.
Inflation can harma. retirees on fixed pensions.b. borrowers who have long-term fixed interest-rate loans.c. wage earners whose incomes grow slower than inflation.d. either (a) or (c).e. all of the above.
Which measures of inflation tend to overstate it?a. The CPI, but not the GDP deflatorb. The GDP deflator, but not the CPIc. Both the GDP deflator and the CPId. Neither the GDP deflator nor the CPI
The CPI overestimates changes in the cost of living becausea. the growth of discount stores where consumers can obtain goods at discount prices has not been adequately represented in the construction of the CPI.b. the CPI does not adequately deal with changes in the quality of products over time.c.
If the consumer price index was 100 in the base year and 110 in the following year, the inflation rate wasa. 110 percent.b. 100 percent.c. 11 percent.d. 10 percent.
The CPI is a measure ofa. the overall cost of goods and services produced in the economy.b. the overall cost of inputs purchased by a typical producer.c. the overall cost of buying a market basket of goods and services purchased by typical consumers.d. the overall cost of stocks on the New York
When would consumers and producers experience increased difficulty in coordinating their plans and decisions?a. In a period of inflationb. In a period of deflationc. In a period of either inflation or deflationd. None of the above
Can wage earners avoid the consequences of inflation?
Who are the winners and losers during inflation?
What problems are inherent with a price-level index?
What is the purpose of a price-level index?
How did the price level behave during the previous century?
Why is the overall price level important?
Does new technology increase unemployment?
Why would higher unemployment compensation in a country like France lead to higher rates of unemployment?
How do search costs lead to prolonged periods of unemployment?
What is an efficiency wage?
What are the three reasons for wages to fail to balance labor supply and labor demand?
If unions are able to increase wages through collective bargaining, thena. some union workers will become unemployed.b. more union workers will be employed in the union sector.c. some union workers will be better off.d. both (a) and (c).
Unemployment insurancea. leads to lower rates of unemployment.b. may reduce the drive for workers to find jobs and thereby prolong unemployment.c. Both (a) and (b) are true.d. None of the above is true.
Efficiency wagesa. can lead to greater unemployment if the quantity of labor supplied is greater than the quantity of labor demanded.b. may attract the most productive workers.c. may lead to less turnover.d. may reduce morale problems.e. All of the above are true.
Which of the following statements is true?a. At the minimum wage, the quantity of labor supplied grows because more people are willing to work at a higher wage.b. At the minimum wage, the quantity of labor demanded falls because some employers would find it unprofitable to hire low-skilled workers
Which of the following are reasons why wages may fail to bring the quantity of labor demanded into balance with the quantity of labor supplied?a. The minimum wageb. Unionsc. Efficiency wage theoryd. All of the above
Does unemployment insurance increase the unemployment rate?
How do changes in job search costs affect the unemployment rate?
How does an efficiency wage cause a higher rate of unemployment?
Can unions cause higher rates of unemployment?
Can a higher minimum wage lead to greater unemployment among the young and low-skilled?
If a fall in demand for domestic cars causes auto workers to lose their jobs in Michigan, while plenty of jobs are available for lumberjacks in Montana, what kind of unemployment results?
If the widespread introduction of the automobile caused a productive buggy whip maker to lose his job, would he be frictionally, structurally, or cyclically unemployed?
Why might frictional unemployment be higher in a period of plentiful jobs (low unemployment)?
What types of unemployment are present at full employment (at the natural rate of unemployment)?
What is the traditional government policy “cure” for cyclical unemployment?
Why might a job retraining program be a more useful policy to address structural unemployment than to address frictional unemployment?
Why do we want some frictional unemployment?
If a nation’s labor force receives a significant influx of young workers,a. the natural rate of unemployment is likely to increase.b. the natural rate of unemployment is likely to decrease.c. the natural rate of unemployment is unlikely to change.d. frictional unemployment will likely decrease to
The natural rate of unemployment would increase when which of the following increases?a. Frictional unemploymentb. Structural unemploymentc. Cyclical unemploymentd. Any of the abovee. Either frictional or structural unemployment
When an economy is operating at full employment,a. the unemployment rate will equal zero.b. frictional unemployment will equal zero.c. cyclical unemployment will equal zero.d. structural unemployment will equal zero.e. both (b) and (d) are correct.
When unemployment rises above the natural rate, it reflects the existence of _____________________ unemployment.a. frictionalb. structuralc. seasonald. cyclical
A federal program aimed at retraining the unemployed workers of the declining auto and steel industries is designed to reduce which type of unemployment?a. Seasonalb. Cyclicalc. Structurald. Frictional
Unemployment caused by a contraction in the economy is calleda. frictional unemployment.b. cyclical unemployment.c. structural unemployment.d. seasonal unemployment.
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