Allison Contreras

Reading Assessment Study Guide

Openstax - Section 21.1
1. Define each of the following: employed, unemployed, not in labor
force, labor force
Employed: persons aged 16 and over in the work force
Unemployed: persons in the labor force looking for work but do not
have a job
Not in labor force: not seeking work/unskilled
Labor force: seeking work and available to work
2. Calculate the unemployment rate. Calculate the labor force
participation rate.

3. Define underemployed. Define discouraged workers.

a. not having enough paid work or not doing work that
makes full use of their skills and abilities.
b. those who have stopped looking for employment and,
hence, are no longer counted in the unemployed
4. Explain the criticisms of measuring unemployment.
Openstax Section 21.3
5. Define cyclical unemployment.
The variation in unemployment caused by the economy moving
from expansion to recession or from recession to expansion
6. Explain the term sticky wages? Explain potential causes of downward
sticky wages.
-The pay of employed workers tends to have a slow response to
the changes in the performance of a company or of the
broader economy.
-Union contracts, minimum wage, and implicit contracts
Openstax Section 21.4

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7. Define frictional unemployment. Define structural unemployment.

a. unemployment that occurs in the meantime, as workers
move between jobs
b. unemployment caused because individuals who have no
jobs lack skills valued by the labor market, either because
demand has shifted away from the skills they do have, or
because they never learned any skills
8. Explain the natural rate of unemployment.
a. The remaining level of unemployment that occurs even
when the economy is healthy
Openstax Section 22.1
9. Define inflation.
-An increase in prices and decrease in the value of money
10.
What is a price index? What does it measure? How is it
calculated?
a. Average prices of goods/services in a time period
b. Measures change over time in prices
c. price of the Market Basket of the year of interest divided
by the price of the Market Basket of the base year,
multiplied by 100
Openstax Section 22.2
11.
What are the major types of price indexes and what are the
differences in each?
a. Consumer Price Index: the variation in prices paid by
typical consumers for retail goods and other items.
b. Producer Price Index: is based on prices paid for supplies
and inputs by producers of goods and services
c. GDP: calculated total of all goods and services in a nation
within a year

Allison Contreras

12.
What is the difference between anticipated and unanticipated
inflation? What is the difference between nominal interest rate and real
interest rate? (p. 161)
a. When people predict inflation coming
b. when people do not know inflation is going to occur until
after the general price level increases
c. nominal: rate before adjustment for inflation
d. real: nominal rate minus inflation