1)Robert received a $100 gift certificate to a bookstore a year ago. The economy has been in an inflationary period for the last year. This gift certificate is
A. not expressed in either real or nominal terms since it is not money.
B. adjusted in terms of the CPI.
C. expressed in nominal terms and is
worth less.
2)One criticism of the unemployment rate is that it
A. does not include the number of discouraged workers as unemployed.
B. is a stock measure.
C. does not include people who are not working and are not looking for work.
1) The correct answer is C. expressed in nominal terms and is worth less. Since the economy has been in an inflationary period, the purchasing power of the gift certificate would decrease over time. Therefore, it is worth less in nominal terms.
2) The correct answer is A. does not include the number of discouraged workers as unemployed. The unemployment rate only includes individuals who are actively seeking employment but are unable to find a job. It does not take into account those who have given up looking for work due to various reasons, such as discouragement or the belief that no jobs are available.
To answer question 1, we need to understand the concept of inflation and its impact on the value of money. Inflation refers to a general increase in prices and decrease in the purchasing power of money over time. In an inflationary period, the value of money decreases.
Given that the economy has been in an inflationary period, the $100 gift certificate received by Robert a year ago would be worth less in terms of its purchasing power. Therefore, the correct answer is C. The gift certificate is expressed in nominal terms and is worth less due to inflation.
To answer question 2, we need to analyze the criticisms related to the unemployment rate.
One criticism is that the unemployment rate does not include the number of discouraged workers as unemployed. Discouraged workers are individuals who are willing and able to work but have given up looking for a job due to various reasons, such as a lack of available opportunities. Since the unemployment rate does not consider discouraged workers as unemployed, it may understate the actual level of unemployment in the economy. Thus, the correct answer is A. The unemployment rate does not include the number of discouraged workers as unemployed.
Another potential criticism is that the unemployment rate is a stock measure. A stock measure refers to a snapshot of a particular point in time. In the case of the unemployment rate, it measures the number of unemployed people at a specific moment. This criticism suggests that the unemployment rate fails to capture the dynamics of job creation and destruction over time, as it does not provide information about the rate at which people transition into or out of unemployment. However, this is not one of the options provided, so it is not the correct answer in this case.
Lastly, the unemployment rate does not include people who are not working and are not looking for work. These individuals, commonly known as "not in the labor force," are excluded from the unemployment rate calculation. While they may not be working, they are not considered unemployed since they are not actively seeking employment. This is another limitation of the unemployment rate, as it does not provide a complete picture of the labor market. However, it is not the correct answer choice in this case.