Professional Documents
Culture Documents
1.1 The unemployment rate is calculated monthly from data gathered by Statistics Canada in its Labour
Force Survey. The unemployment rate equals the percentage of the labour force that is unemployed:
(Unemployed/Labour Force) 100. The three conditions to be counted as unemployed are the
person (1) did not work in the previous week, (2) was available for work, and (3) actively looked for
work at some time during the previous four weeks.
1.2 The official Statistics Canada (StatsCan) measure of the unemployment rate understates the true
degree of unemployment to the extent that it does not count discouraged workers as unemployed
because they have stopped looking for a job, and it counts involuntary part-time workers as
employed even though these workers would prefer to work more hours. The official StatsCan measure
overstates the true degree of unemployment because (1) some people claim are not actively looking
for work but they claim to be so they can remain eligible for government payments to the unemployed
and (2) some people have jobs in the underground economy that they do not claim.
2.1 The four types of unemployment are frictional unemployment, structural unemployment, cyclical
unemployment, and seasonal unemployment. Frictional unemployment is short-term unemployment
that arises from the process of matching workers with jobs. Structural unemployment is
unemployment that arises from a persistent mismatch between the skills and attributes of workers
and the requirements of jobs. Cyclical unemployment is unemployment caused by a business cycle
recession. Seasonal unemployment is unemployment caused by changes in economic activity due to
changes in the seasons.
3.1 The payment of government employment insurance likely raises the unemployment rate. The
employment insurance payments lower the opportunity cost (the income lost by not working) of
continuing to search for a job, which leads the unemployed to spend more time searching for a job.
The payment of government employment insurance lessens the severity of recessions by helping the
unemployed maintain their income and spending.
3.2 a. Minimum wage laws likely increase the rate of unemployment if they are set above the market
clearing wage rate. (Author’s note: this is still subject to some debate.)
b. Labour unions, by negotiating higher wages for their members, tend to increase the unemployment
rate.
c. Efficiency wages, like labour unions, tend to increase the unemployment rate.
Measuring Inflation (pages 116–120)
5.4 Learning Objective: Define price level and inflation rate, and understand how they are
computed.
4.1 The GDP deflator is the broadest measure of the price level because it includes the prices of all final
goods and services included in GDP. The Consumer Price Index measures the prices of goods and
services purchased by consumers. The Producer Price Index measures the prices of goods and services
at all stages of the production process.
4.2 The potential biases include the substitution bias, the increase in quality bias, the new product bias,
and the outlet bias.
Using Price Indexes to Adjust for the Effects of Inflation (pages 120–121)
5.5 Learning Objective: Use price indexes to adjust data for the effects of inflation.
5.1 A nominal variable is a variable measured in current dollars, which means that it is measured using
the actual prices from that year. A real variable is a variable measured in constant dollars, which
means that it is measured using prices from the base year. That is, a real variable is adjusted for the
effects of inflation.
5.2 The real wage for a given year between 2004 and 2016 can be calculated by using this formula: Real
wage = (Nominal Wage/CPI) 100. For example, the real wage for 2005 would be calculated as
Real wage2005 = (Nominal Wage2005 / CPI2005) 100.
6.1 The nominal interest rate is the stated interest rate on a loan, while the real interest rate is the
nominal interest rate minus the inflation rate.
6.2 It is impossible to know whether a particular nominal interest rate is “high” or “low” without
knowing the inflation rate. It is the real interest rate that matters to borrowers and lenders, not the
nominal interest rate. A nominal interest rate of 5 percent with an inflation rate of zero has a higher
real interest rate than a nominal interest rate of 20 percent with an inflation rate of 19 percent.
7.1 We know from the circular flow of expenditures and income that when inflation increases the
nominal value of expenditures it must also increase nominal incomes. Consequently, inflation does
not reduce the purchasing power of the average consumer.
7.2 Inflation affects the purchasing power of money. People with incomes rising faster than the rate of
inflation enjoy an increasing purchasing power, while people with incomes rising more slowly than
the rate of inflation are hurt by a decreasing purchasing power. In general, inflation particularly
hurts people on fixed incomes, such as retired persons who may be receiving a pension of a fixed
number of dollars each year. (As we noted, though, the Social Security payments received by retired
workers are increased every year by an amount equal to the change in the CPI.)
1.1
Working Age Population 31,565,331
Employment 19,374,800
Unemployment 1,458,318
Unemployment Rate 7%
Labour Force 20,833,118
Participation Rate 66%
Employment Population Ratio 61.4%
The number of people unemployed is computed using the definition that the unemployment rate
equals the number of unemployed divided by the sum of the number of unemployed and the number
of employed. The labour force equals the employed plus the unemployed. The working-age population
is computed using the definition that the labour force participation rate equals the labour force divided
by the working-age population. The employment-population ratio equals the number of employed
divided by the working-age population.
1.2 The key is to realize that the labour force is not a fixed number of people. If enough people enter the
labour force, with most becoming employed and only some becoming unemployed, then the
unemployment rate could decrease while the number of unemployed increases.
1.3 The unemployment rate fell because people stopped looking for work and became discouraged
workers. The “headline” number of jobs lost, 2,800, actually refers to the net number of jobs
created. Net jobs created is the number of new jobs created minus the number of jobs lost. In this case,
2,800 more jobs were lost than created.
2.1 Decisions are made by comparing the marginal cost and benefit associated with the activities. The
decision of applying for graduate school depends on the opportunity cost of attending versus the
payoff received from a graduate degree. During a recession, jobs are less plentiful and the chances
of getting a high-wage job offer are lower. This means that the opportunity cost of attending
graduate school is lower, so new university and college graduates are more likely to attend graduate
school instead. Conversely, demand in the job market is higher during an expansion, so the
opportunity cost of attending graduate school is also higher.
2.2 Disagree. The economy would operate less efficiently if frictional unemployment were eliminated.
By devoting the time to job search, workers end up with jobs they find satisfying and in which they
can be more productive. Government policy to enhance the job search process of matching workers
with jobs could make the economy operate more efficiently, but entirely eliminating frictional
unemployment would not be efficient.
2.3 For someone frictionally unemployed, the advice would be to keep searching. The person has the
required skills, but matching worker skills to job openings takes time. For someone structurally
unemployed, the advice would center on the need to retrain or to find another occupation. For
someone cyclically unemployed, the advice would be to realize that the search will take longer
because of the recession, and to consider temporarily taking a lower-paying job or going back to
school until the economy picks up.
2.4 Efficiency wages can increase the productivity of workers as well as workers incomes. They can
also increase the profitability of firms. The main disadvantage of efficiency wages is they tend to
increase unemployment.
3.1 If Parliament eliminated the Employment Insurance system, the opportunity cost of job search
would increase, decreasing the level of frictional unemployment. There would be conflicting effects
on the level of real GDP. Lower frictional unemployment would increase real GDP, but the
possibility of less effective matching of worker skills to jobs due to less job search would decrease
real GDP. Well-being would probably decrease if the unemployment insurance system were
eliminated because unemployed workers would suffer large drops in income.
3.2 Prices were much lower in 1965 than they are today. It is difficult to state whether $0.50 was below
the equilibrium wage in 1965 without information about the level of wages in 1965.
3.3 If this analyst is correct, we cannot conclude that Costco is paying efficiency wages and Walmart is
not. The higher Costco wages would be due to the higher-skilled workers required to sell the
Costco’s higher-cost products.
4.2 The CPI, at any point in time, uses a fixed market basket, comparing the cost of buying the fixed
market basket in the current period to the cost of buying the fixed market basket in the base period.
As a fixed market basket, Statistics Canada uses the quantities in the market basket, not the
quantities actually purchased in the current period.
4.3 a.
City January 2011 January 2012 Percentage Change
Halifax 111.6 112.6 0.9%
Montreal 112.8 115.0 1.95%
Toronto 107.8 114.2 5.94%
Regina 142.1 149.7 5.35%
Calgary 95.9 95.8 –0.1%
Vancouver 98.4 98.4 0.0%
Toronto had the highest house price increase from January 2011 to January 2012.
Calgary had the lowest, with house prices decreasing 0.1%.
c. Because we’re dealing with index numbers we can only tell how much house prices have
changed from one year to another. We’d need actual house prices to tell which city had the most
expensive homes. If all the cities had the same house prices in the base year, we could use an
index to compare house prices, but that definitely wasn’t the case in January 2011. Price indexes
like this are really only useful for comparing prices over time, not between cities.
Using Price Indexes to Adjust for the Effects of Inflation (pages 120–121)
5.5 Learning Objective: Use price indexes to adjust data for the effects of inflation.
5.1 In the United States, the real minimum wage in 1957 was $3.70 [($1.00/27) 100], and in 2010 it
was $3.37 [($7.25/215) 100]. In France, the real minimum wage in 1957 was €1.9 [(€0.19/10)
100], and in 2010 it was €6.92 [(8.86/128) 100].
Therefore, between 1957 and 2010, there was an 8.92 percent decrease in the real minimum wage in
the United States: [($3.37 – $3.70) / $3.70] 100. And there was a 264.21 percent increase in the
real minimum wage in France: [(€6.92 – €1.9) / €1.9] 100.
It does not matter whether we have information about the base year as long as we have the CPI data.
Whatever the base year is, we would get the same percentage increase in prices. The percentage
increase in the price level was less in the United States {[(215 – 27)/27 100] = 696%} than in
France {[(128 – 10)/10 × 100] = 1,180% }.
5.2 Real GDP in 2007 = (Nominal GDP in 2007 /CPI in 2007)×100 = (1,529,6/111.45)×100 =
$1,372.45 billion. Real GDP in 2009 = (Nominal GDP in 2009/CPI in 2009) = (1529.0/114.45) ×
100 = $1,336.00 billion, making the percentage drop in real GDP = {(1,372.45-1336)/1,336} ×
100% = 2.7%.
6.1 The real interest rate on a loan with a nominal interest rate of 20 percent and 19 percent inflation is 1
percent. The real interest rate on a loan with a nominal interest rate of 5 percent and 2 percent inflation
is 3 percent. Therefore, you should prefer the loan with the 20 percent nominal rate.
6.2 Real interest rate = Nominal interest rate – Inflation rate. With $1,000 you can purchase 500
hamburgers at the beginning of the year. If you lend $1,000 for one year at an interest rate of 5
percent, you will receive $1,050 at the end of the year. With the higher price of hamburgers, at the
end of the year you can buy $1,050/$2.08 = 504.8 hamburgers. So, you can purchase [(504.8 −
500)/500] 100 = 0.96% more hamburgers. Therefore, the real interest rate you receive on the loan
is 0.96 percent. Notice that this is very close to the real interest rate on the loan, calculated by
subtracting the 4 percent inflation in hamburger prices from the 5 percent nominal interest rate on
the loan.
6.3 Lenders would agree to a nominal interest rate of almost zero percent, because with deflation, the
real interest rate would be higher than the nominal interest rate by the rate of deflation.
7.1 Menu costs are the costs to firms of changing prices. The Internet allows firms to change prices at
little cost so that it has reduced the size of menu costs.
7.2 When the inflation rate turns out to be much higher than most people expected, then the real interest
rate is lower than it was expected to be when loans were made. This means that you would rather be a
borrower.
Hiss!
Sanders nyökkäsi.
Oli mies, joka oli ostanut vaimon maksaen kokonaista tuhat putkea
ja kaksi säkillistä suolaa. Mies oli elänyt vaimon kanssa kolme
kuukautta, kun tämä lähti talosta.
Niin viisas hän oli, (ken tiesi eri tapauksiin liittyneet sivuseikat?)
niin jalo, niin rauhallinen, että Akasavan päällikkö, jonka oli
säännöllisesti suoritettava veronsa, käytti sitä hyväkseen eikä
lähettänyt viljaa eikä kalaa ja teki sitten matkan kaukaiseen Ikaniin,
jossa kohtasi kuninkaan sedän Sato-Koton ja sopi hänen kanssaan
yhteistoiminnasta. Kunnes sato oli kypsä, kuningas sivuutti
ensimmäisen laiminlyönnin, mutta toisesta hän ryhtyi toimiin; ei
Akasava eikä Ikan lähettänyt, ja Isisin kansa tuli rikkomuksesta
tyytymättömäksi, murisi, ja kuningas istui majansa yksinäisyydessä
miettien sopivaa ja tehokasta keinoa.
*****
Ase oli jo hänen kädessään, kun joku löi häntä ja hän kaatui.
*****
— Niin.
— Rohkea pikku pentele, ehdotti tohtori.
— Tarpeeksi.
Hän kuuli tohtorin liikahtavan, kuuli hytin oven käyvän, sitten hän
kääntyi seinään päin ja itki.
KIVENPITÄJÄT
*****
— Tuo minulle n:o 14, sanoi hän palvelijalleen, ja Abibu toi hänelle
kyyhkysen.
*****
Tämä kivi oli aivan erikoinen fetissi ja vaati erityistä käsittelyä. Hän
tiesi, että kivi oli olemassa. Siitä oli lukemattomia tarinoita, ja eräs
tutkija oli katsellut sitä suurennuslasinsa läpi. Myös hän oli kuullut
»messinkiputkisista hengistä» — noista mielikuvituksellisista ja
sotaisista varjoista, jotka johtivat rauhan miehet taiston teille — paitsi
ei ochorilaisia, jotka eivät koskaan sotineet ja joita ei mikään henkien
paljous voinut johtaa väkivallan töihin.
Abibu valitsi ateria-ajan, kun aurinko oli mennyt pois ja maailma oli
harmaa ja puut liikkumattomat. Hän tuli takaisin tietoineen, kun
Sanders oli juomassa toista kahvikuppiaan pienen kansihytin
yksinäisyydessä.