Civilian Unemployment Rate
Core Consumer Price Index or Personal Consumption Expenditures
Headline Consumer Price Index or Personal Consumption Expenditures
Effective Federal Funds Rate
Real Gross Domestic Product
Total Nonfarm Payrolls Employment
Capacity Utilization
Consumption and Saving
Dollar/Euro Exchange Rate
Hours Worked
Housing Starts
Manufacturing Production
New Orders Capital Goods (Ex Aircraft)
Output Per Hour of All Persons
Ratio of Inventories to Sales
Real Exports
Retail Sales
Trade Balance on Goods and Services
University of Michigan: Consumer Sentiment
Yield on 10-Year Treasury Bond

1. Define the unemployment rate.
2. Are full time students unemployed? Retired people? A person who has given up looking for a job because he or she doesn’t believe there are any jobs available.
3. What does the unemployment rate tell us about current resource utilization and output gap in the economy?
4. Can you tell the NAIRU from the current unemployment rate?

1. Define the CPI and PCE price indices.
2. Explain the difference between headline and core measures of inflation.
3. Which measure is higher right now: headline or core inflation? What does that tell you about food and energy inflation?
4. Are these measures consistent with indicators of the output gap? Explain.

1. Define the CPI and PCE price indices.
2. Explain the difference between headline and core measures of inflation.
3. Which measure is higher right now: headline or core inflation? What does that tell you about food and energy inflation?
4. Are these measures consistent with indicators of the output gap? Explain.

1. What is the federal funds rate?
2. How does monetary policy influence the federal funds rate?
3. What is the approximate current level of the effective federal funds rate?
4. Why has monetary policy kept the rate so low in recent months?

1. Define gross domestic product. What is “real” GDP?
2. What do changes in real gross domestic product tell us about the economy?
3. Given the evidence in the chart, would you judge the U.S. economy to be growing at faster than, slower than, or at about the sustainable rate?
4. If the U.S. is growing faster than the long run sustainable rate, does that necessarily mean that that the Fed should raise interest rates immediately? Why or why not?

1. What do trends in payroll employment tell us about the current output gap and economic activity?
2. What might trends in payroll employment tell us about the future output gap and economic activity?

1. Define capacity utilization.
2. What percent of U.S. capacity is currently being utilized?
3. How does this compare to capacity utilization when the unemployment rate is low?
4. What does this chart suggest about the output gap right now?

1. What is an exchange rate?
2. According to the graph below, how many dollars does it take to buy one euro (according to the latest point on the chart)?
3. How many euros does it take to buy one dollar?
4. According to the graph below, has the number of dollars it takes to buy one euro generally been trending up or down over whole the period shown?
5. What does the trend tell you about the price of U.S. goods for Europeans?
6. What does the trend tell you about the price of European goods for Americans?

1. Describe the recent level and trend in housing starts.
2. How are housing starts related to interest rates? If monetary policy was conducted to raise interest rates, what do you project would happen to housing starts as a result?
3. When people buy new houses, they also tend to buy refrigerators, furniture and other items. If monetary policy was conducted to raise interest rates, what do you think might happen to housing-related consumer spending as a result?

1. Define the industrial production index.
2. Has the level of industrial production been rising or falling over the last year?
3. What does this indicate about probable trend in the output gap?

1. Explain what is meant by unit labor cost. How is it calculated by the Bureau of Labor Statistics?
2. During recessions, what tends to happen to unit labor costs?
3. What do the current measures of unit labor costs say about the likelihood of near term inflation?

1. Retail sales are a indicator of current consumption spending by households. What does the chart below tell you about the likely growth of GDP in current and future quarters?

1. Why might you be interested in a measure of consumer sentiment?
2. How would you assess current consumer sentiment? On a scale of one to ten, do you think consumers are feeling optimistic or pessimistic?
3. What important economic variables might this affect in the future?