Miscellaneous
The short-run Phillips Curve shows an inverse relationship between these two key macroeconomic variables.
Inflation and unemployment
What is the equation for solving for the labor force participation rate?
(LF/Working Age Pop)*100=LFPR
How does CPI differ from GDP deflator?
GDP deflator includes non-consumer goods and services (government spending, investment spending)
Draw an aggregate market that is experiencing stagflation.
N/A
Which economist believes that supply drives demand and his work is what the neoclassical perspective is based on?
Jean Baptiste Says
Draw an aggregate market and phillips curve graph that depicts an unemployment rate that is less than the natural rate of unemployment.
N/A
Give an example of a frictionally unemployed and structurally unemployed individual.
Frictional unemployment: college student that just graduated looking for a job.
Structural unemployment: EZ pass toll booth worker.
In 2022 a basket of goods and services cost $145.87 in 2023 it was $160.96 assume 2022 is the base year. What is inflation?
10.34%
During a recessionary gap the difference between the natural rate of unemployment and our new unemployment value represents what?
The percentage of people cyclically unemployed.
What would a keynesian economist recommend if we were experiencing a recessionary gap?
Any expansionary policy.
A bank wants a rate of return of 5% and the stated rate on the loan is 7.5%. What does the bank anticipate inflation being?
2.38%
What does it mean to be unemployed?
You are without work and have been actively applying for jobs in the last 4 weeks.
What are two biases relevant to CPI that would cause it to overstate the inflation rate?
Substitution bias, new product bias, discount store purchases bias, and change in quality bias.
Give an example of something that would cause an inflationary gap and something that would cause a recessionary gap.
Inflationary gap: increase in consumer spending, decreasing interest rates, exporting more goods because it is cheaper for us to produce them.
Recessionary gap: decrease in consumer spending, increasing interest rates, importing more goods if a countries currency is weakening.
From a neoclassical prespective, how should we respond to a demand pull inflationary gap?
Allow wages to increase.
Give an example of how a change to net exports could result in the U.S. being in a recessionary gap?
A stronger U.S. dollar, U.S. is experiencing higher levels of inflation relative to other countries.
Give three examples of people who are not apart of the labor force.
Stay at home parents, incarcerated individuals, military members, people on disability, full-time students
What is the one thing economists believe will fix stagflation without resulting in higher inflation or unemployment? What are the three characteristics of stagflation?
Improvements in productivity growth
High unemployment, high price level, stagnant economy
Explain what expansionary fiscal policy consists of. Explain what contractionary monetary policy consists of.
Expansionary fiscal policy: Increase government spending decrease taxes.
Contractionary monetary policy: Increase interest rates.
From the neoclassical perspective, what should we as a society prioritize to experience long-term growth?
Improving the factors of production - physical capital, human capital, and technology.
A society has 150 million working-age individuals and a labor force participation rate of 70%. If this society has 5 million unemployed individuals, what is the unemployment rate?
4.76%
Who is included in the civilian non-institutionalized working age population.
Anyone over the age of 16 that is not institutionalized (military, prison, nursing home)
Explain the difference between demand-pull inflation and stagflation.
Demand-pull inflation exists when real gdp exceeds potential gdp with lower unemployment. Stagflation results in real gdp being less than potential gdp and higher rates of unemployment.
Give an example of a scenario that would impact the aggregate market and result in a lower unemployment rate.
Anything that shifts AD to the right: more consumer spending, decrease in taxes, lower interest rates.
Explain the difference between rational and adaptive expectations.
Rational expectations uses all available information and past experiences to make decisions. Adaptive expectations uses just past experiences.