Term
| Macroeconomic Goal: Stable Prices |
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Definition
*prices changes are typically measured using a price index
*a price index shows the average price level in a given as a percentage the average price level in a base year
*in the US, price changes (inflation) are typically measured using the consumer price index (CPI)
*nominal values --> price index --> real values
*inflation rate = % change in price index |
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Term
| Consumer Price Index (CPI) |
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Definition
| *a measure of the average of the prices paid by urban consumers for a fixed market basket of consumption goods and services |
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Term
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Definition
*the percentage increase in the consumer price index between 2 consecutive years
*CPI Base year: 1982-1984
*inflation rate = % change in CPI
*year2 - year1/year1 x 100 |
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Term
| Comparing the Actual Inflation Rate to A Target Value |
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Definition
*the target inflation rate is set in the low to moderate range of 0-4%
*any inflation rate above 4% is deemed to be excessive
*any inflation rate below 0% (deflation) is deemed to be unhealthy |
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Term
| Macroeconomic Goal: Law Unemployment |
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Definition
*a person is considered to be unemployed if he or she is not working but is actively seeking work
*a person is considered to be employed if he or she is working at least 1 hour per week for pay or at least 15 hours per week without pay in a personall or family owned business |
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Term
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Definition
*lost production
*federal budget deficits
*personal cost |
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Term
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Definition
*the percentage of the civilian labor force that is unemployed
*unemployment rate = (unemployment/civilian labor force) x 100 |
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Term
| Setting an Unemployment Goal |
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Definition
*is 0% employment a feasible unemployment rate to you?
*macroeconomists consider some unemployment to occur "naturally" ie- it in present, even when the economy is fully employed |
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Term
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Definition
*frictional
*structural
*seasonal
*cyclical |
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Term
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Definition
*the unemployment that arises normal labor turnover
*a certain amount of frictional unemployment is assumed to occu, even when the economy is fully employed |
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Term
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Definition
*the employment that arises when changes in technology or internation competition change the skills needed to perform jobs or change the location of jobs
*a certain amount of structural unemployment is assured to occur, even when the economy is fully employed |
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Term
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Definition
*the unemployment that arises becuase of seasonal patterns
*a certain amount of seasonal unemployment is assumed to occur, even when the economy is fully employed |
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Term
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Definition
*the fluctuating unemployment over the business cycle that increases during a recession and decreases during an expansion
*cyclical unemployment is not considered to be natural
*when cyclical unemployment is present, the economy is not considerd to be fully employed
*when the unemployment rate is above 6% |
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Term
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Definition
| *when there is no cyclical unemployment or, equivalently, when all the unemployment is frictional, structural, or seasonal |
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Term
| Natural Unemployment Rate |
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Definition
*the unemployment rate when the economy is at fully employment
*currently assumed to be 6% |
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