Macro Factors affecting Employment

Increase in the prices of goods and services over time is called

• Inflation

• Deflation

Why does the Federal Reserve use federal funds RATE?

• To modulate inflation

• To put more dollars in the economy

What does the Consumer Price Index Measure (CPI)?

• The price increases of a particular basket of goods and services

• The price fluctuation AND quantity of a particular basket of goods and services

What is the price mechanism?

• The adjustment of prices in response to changing market conditions

• The surplus of prices in response to changing market conditions

Which two categories is left out of the core inflation rate?

• Food and energy

• Food and mortgage loans

Who measures inflation?

• It is published monthly by the Bureau of Labor Statistics

• It is published monthly by the Federal Reserve Central Bank

What is the consumer price index (CPI)

• A measure of the cost of a fixed “market basket” of consumer goods and services

• A measure of the cost of a variable “market basket” of consumer goods and services

If inflation is 10% and you get a 7% raise, what has happened to your money income? real income?

• Your money income has increased by 7% but your real income has decreased by 3%

• Your money income has increased by 7% but your real income has decreased by 10%

If your income goes up from $30,000 to $32,000 and inflation is 5%, are you better or worse off?

• You are better off because your real income has increased by 1.7%

• You are worse off because your real income has decreased by 1.7%

How does inflation change society?

• It breeds uncertainty, diminishes buying power, erodes real savings, causes unemployment, alters social traditions, and confuses the price mechanism

• It breeds uncertainty, increases buying power, erodes real savings, causes unemployment, alters social traditions, and confuses the price mechanism