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CHAPTER 9 | Unemployment and Inflation
Brief Chapter Summary and Learning Objectives

9.1 Measuring the Unemployment Rate, the Labor Force Participation Rate,
and the Employment-Population Ratio (pages 280–290)
Define the unemployment rate, the labor force participation rate, and the employment-population
ratio and understand how they are computed.
▪ The U.S. Bureau of Labor Statistics uses a monthly household survey to calculate the
unemployment rate, the labor force participation rate, and the employment-population
ratio.
9.2 Types of Unemployment (pages 290–293)

Identify the three types of unemployment.
▪ The three types of unemployment are as follows: frictional, structural, and cyclical.
9.3 Explaining Unemployment (pages 293–295)

Explain what factors determine the unemployment rate.
▪ Government policies can reduce the level of frictional and structural unemployment by
aiding job search and worker retraining.
▪ Government policies can add to the level of frictional and structural unemployment by
increasing the time workers devote to searching for jobs, providing disincentives for
firms to hire workers, or by keeping wages above their market level.
9.4 Measuring Inflation (pages 295–298)

Define the price level and the inflation rate and understand how they are computed.
▪ The price level measures the average prices of goods and services in the economy. The
inflation rate is the percentage increase in the price level from one year to the next.
9.5 Using Price Indexes to Adjust for the Effects of Inflation (pages 298–300)
Use price indexes to adjust for the effects of inflation.
▪ To correct for the effects of inflation, we divide a nominal variable by a price index and
multiply by 100 to obtain a real variable.
9.6 Nominal Interest Rates versus Real Interest Rates (pages 301–302)
Distinguish between the nominal interest rate and the real interest rate.
▪ The real interest rate is the nominal interest rate minus the inflation rate.
9.7 Does Inflation Impose Costs on the Economy? (pages 302–306)

Discuss the problems that inflation causes.
▪ When the inflation rate is different from the expected inflation rate some people gain and
some people lose.
Copyright © 2019 Pearson Education, Inc.

CHAPTER 9 | Unemployment and Inflation 195
Key Terms
Consumer price index (CPI), p. 296. A Labor force participation rate, p. 282. The
measure of the average of the prices a typical percentage of the working-age population in the
urban family of four pays for the goods and labor force.
services they purchase.
Menu costs, p. 303. The costs to firms of
Cyclical unemployment, p. 291. Unemployment changing prices.
caused by a business cycle recession.
Natural rate of unemployment, p. 292. The
Deflation, p. 302. A decline in the price level. normal rate of unemployment, consisting of
frictional unemployment and structural
Discouraged workers, p. 281. People who are unemployment.
available for work but have not looked for a job
during the previous four weeks because they Nominal interest rate, p. 301. The stated
believe no jobs are available for them. interest rate on a loan.
Efficiency wage, p. 295. An above-market wage Price level, p. 295. A measure of the average
that a firm pays to increase workers’ prices of goods and services in the economy.
productivity.
Producer price index (PPI), p. 298. An average
Employed, p. 280. In government statistics, of the prices received by producers of goods and
someone who currently has a job or who is services at all stages of the production process.
temporarily away from his or her job.
Real interest rate, p. 301. The nominal interest
Employment-population ratio, p. 282. The rate minus the inflation rate.
percentage of the working-age population that is
employed. Structural unemployment, p. 291.
Unemployment that arises from a persistent
Frictional unemployment, p. 291. Short-term mismatch between the skills or attributes of
unemployment that arises from the process of workers and the requirements of jobs.
matching workers with jobs.
Unemployed, p. 280. In government statistics,
Inflation rate, p. 295. The percentage increase someone who is not currently at work but who is
in the price level from one year to the next. available for work and who has actively looked
for work during the previous month.
Labor force, p. 280. The sum of employed and
unemployed workers in the economy. Unemployment rate, p. 280. The percentage of
the labor force that is unemployed.
Chapter Outline
Why Would Boeing Cut Thousands of Jobs As the Economy Expands?
Boeing Company is one of the world’s largest manufacturers of commercial and military aircraft. During
recessions, air travel declines and airlines cut back on orders for new planes. The recession of 2001 caused a
decline of more than 50 percent of Boeing’s deliveries of planes. As a result, the firm laid off 30,000
workers. The recession of 2007–2009 caused Boeing to lay off 7,000 workers. By 2015, Boeing’s deliveries
of planes reached a new peak, before declining again in 2016. Boeing faced three challenges. First, it had to
cut prices to compete with rival firms such as Airbus Group and Bombardier. Second, Airbus had made
improvements to its competing A320 model and began winning a majority of new orders for jetliners. Third,
cuts to military spending harmed sales in Boeing’s defense and space unit.

196 CHAPTER 9 | Unemployment and Inflation
Measuring the Unemployment Rate, the Labor Force Participation Rate,

9.1 and the Employment-Population Ratio (pages 280–290)
Learning Objective: Define the unemployment rate, the labor force participation rate,
and the employment-population ratio and understand how they are computed.
A. The Household Survey
Each month the U.S. Bureau of the Census conducts the Current Population Survey to collect data needed
to compute the monthly unemployment rate. The Department of Labor’s Bureau of Labor Statistics (BLS)
uses these data to calculate the unemployment rate. In government statistics, an employed person is
someone who currently has a job or is temporarily away from his or her job. An unemployed person is
someone who is not currently at work but who is available for work and who has actively looked for work
during the previous month.
The labor force is the sum of employed and unemployed workers in the economy. The unemployment
rate is the percentage of the labor force that is unemployed. Discouraged workers are people who are
available for work but have not looked for a job during the previous four weeks because they believe no
jobs are available for them. The labor force participation rate is the percentage of the working-age
population in the labor force. The employment-population ratio is the percentage of the working-age
population that is employed.
B. Problems with Measuring the Unemployment Rate

The unemployment rate is not a perfect measure of the current state of joblessness. During a recession, an
increase in the number of discouraged workers occurs, but these workers are not counted as unemployed.
The BLS counts people as employed if they hold part-time jobs even though they would prefer to hold
full-time jobs. There are other problems that cause the measured unemployment rate to overstate the
extent of joblessness. The survey used to measure the unemployment rate does not verify the responses of
people included in the survey. A person might claim to be actively looking for a job to remain eligible for
government programs. Other people might be employed but engaged in illegal activity or might want to
conceal a legitimate job to avoid paying taxes.
C. Trends in Labor Force Participation

The labor force participation rate determines the amount of labor that will be available to the economy
from a given population. The higher the labor force participation rate, the more labor will be available and
the higher a country’s level of GDP. The labor force participation rate of adult men has declined gradually
since 1948, but the labor force participation rate of adult women has increased sharply. The overall labor
force participation rate rose from 59 percent in 1948 to 63 percent in 2016.
D. Unemployment Rates for Different Groups

Different groups in the population can have very different unemployment rates. In April 2017, Asians had a
lower unemployment rate, and African Americans had a higher unemployment rate, than the overall rate.
E. How Long Are People Typically Unemployed?

In the modern U.S. economy, the typical unemployed person stays unemployed for a relatively brief
period of time, although that time lengthens significantly during a recession.
F. The Establishment Survey: Another Measure of Employment

The BLS uses the establishment survey, sometimes called the payroll survey, to measure total
employment in the economy. This monthly survey samples about 300,000 business establishments to
provide information on the total number of persons who are employed and on a company payroll. Despite
some drawbacks, the establishment survey has the advantage of being determined by actual payrolls. In
recent years, some economists have come to rely more on establishment survey data than on household
survey data in analyzing current labor market conditions.

G. Revisions in the Establishment Survey Employment Data: How Bad Was the
2007–2009 Recession?
To avoid long waits in supplying data, such as the employment data from the establishment survey, to
policymakers and the general public, government agencies typically issue preliminary estimates that they
revise as additional information becomes available.
H. Job Creation and Job Destruction over Time

The U.S. economy creates and destroys millions of jobs every year. The creation and destruction of jobs
result from changes in consumer tastes, technological progress, and the successes and failures of
entrepreneurs in responding to the opportunities and challenges of shifting consumer tastes and
technological change. When the BLS announces the increases or decreases in the number of people
employed and unemployed each month, these are net figures.
Teaching Tips
The end of the chapter in the main text includes a special category of exercises titled Real-Time Data
Exercises (RTDA). These exercises help students become familiar with a key data source, learn how to
locate data, and develop skills in interpreting data. Those exercises marked with a red circle allow
students and instructors to use the latest data from the Web site of the Federal Reserve Bank of St. Louis
(FRED). Many RTDA exercises require more elaborate calculations than other problems as well as the
use of Excel spreadsheets.
Extra
How Unusual Was the Unemployment Situation Following the
Apply the
2007–2009 Recession?
Concept
The Great Depression of the 1930s left its mark on nearly everyone who lived through it. The Depression
began in August 1929, became worse after the stock market crash in October 1929, and reached its lowest
point in 1933, following the collapse of the banking system. Real GDP fell by more than 25 percent
between 1929 and 1933—the largest decline ever recorded. The unemployment rate in 1933 was above 20
percent—the highest rate ever recorded. The unemployment rate did not return to its 1929 level until
1942, the year after the United States entered World War II. With the unemployment rate so high for so
long, many people were out of work for years. As one historian put it: “What was distinctive about the
Great Depression, in fact, was . . . the extraordinary lengths of time that most jobless men and women
remained out of work.”
By the 2000s, many people in the United States, including most economists and policymakers, believed
that prolonged periods of unemployment such as the U.S. economy had suffered from during the 1930s
were very unlikely to happen again. Although the 1981–1982 recession had been severe and the
unemployment rate had risen above 10 percent for the first time since the 1930s, the recovery was strong,
and many unemployed workers found new jobs relatively quickly. So, following the 2007–2009
recession, most economists and policymakers were unprepared for how slowly the unemployment rate
declined and for how much the average period of unemployment rose. During the 1981–1982 recession,
the unemployment rate peaked at 10.8 percent in December 1982, but 18 months later, in June 1984, it
had already declined to 7.2 percent. In contrast, after the recession of 2007–2009, the unemployment rate
peaked at 10.0 percent in October 2009, while 18 months later it had declined by only 1 percentage point
to 9.0 percent. The following figure shows that the average period of unemployment was twice as high
following the 2007–2009 recession as following any other recession since the end of World War II.

Unemployment was so persistent and widespread that a survey taken by the Pew Research Center in the
spring of 2011 found that more than half of all households had experienced at least one member losing his
or her job during the previous year. Another Pew survey taken in June 2011 found that more than half of
people with jobs expected to receive a pay cut or to lose their job during the next year. As we have seen,
one drawback to the unemployment data is that workers who drop out of the labor market are no longer
counted by the BLS as unemployed. As a result, some economists focus on the employment–population
ratio because it measures the fraction of the population that has jobs. The following figure shows the
employment–population ratio for the period from 1948 through mid-2013. The overall upward trend of
the ratio reflects the increased labor force participation rate of women. In each recession, the
employment–population ratio falls as some workers lose their jobs. The fall of the employment–
population ratio was particularly dramatic during the recession of 2007–2009, and the ratio was actually
even lower four years after the end of the recession. The fall of the employment–population ratio may be
the best indication of how weak the U.S. labor market was during and after the 2007–2009 recession.
As we will see in later chapters, explaining the weakness of the U.S. labor market during these years had
become a top priority of economists and policymakers.
Sources: Alexander Keyssar, Out of Work: The First Century of Unemployment in Massachusetts, New York: Cambridge University
Press, 1986, p. 290; Federal Reserve Bank of St. Louis; U.S. Bureau of Labor Statistics; Pew Research Center, “The Recession,
Economic Stress, and Optimism,” May 4, 2011; and Pew Research Center, “Views of Personal Finances,” June 23, 2011.

Question
An article published in the New York Times in July 2011 argued: “For the second straight year, the
recovery in the job market has essentially stalled. This chart, showing the share of adults with jobs, offers
the best summary you’ll find.” The “share of adults with jobs” is known more formally as the
employment–population ratio. Why might the employment–population ratio provide the “best summary”
of the state of the job market rather than the unemployment rate?
Source: David Leonhardt, “Overly Optimistic, Once Again,” New York Times, July 8, 2011.
Answer
A weakness of the unemployment rate is that it does not count as unemployed those workers who drop
out of the labor force. As a result, some economists focus on the employment-population ratio because it
measures the fraction of the working-age population that has jobs.
Types of Unemployment (pages 290–293)

9.2 Learning Objective: Identify the three types of unemployment.
A. Frictional Unemployment and Job Search

Most workers spend time engaging in a job search, and most firms spend time searching for people to fill
job openings. Frictional unemployment is short-term unemployment that arises from the process of
matching workers with jobs. There will always be some workers who are frictionally unemployed
because they are between jobs and in the process of searching for new ones. Some unemployment is due
to seasonal factors, such as weather or fluctuations in demand during different times of the year. Seasonal
unemployment refers to unemployment due to factors such as weather, variations in tourism, and other
calendar-related events.
B. Structural Unemployment
Structural unemployment is unemployment that arises from a persistent mismatch between the skills or
attributes of workers and the requirements of jobs. This type of unemployment can last for longer periods
than frictional unemployment because workers need time to learn new skills.
C. Cyclical Unemployment
When the economy moves into recession, many firms find their sales falling and cut back on production.
As production falls, firms lay off workers. Cyclical unemployment is unemployment caused by a
business cycle recession.
D. Full Employment
The natural rate of unemployment is the normal rate of unemployment, consisting of frictional
unemployment and structural unemployment. The natural rate of unemployment is also called the full-
employment rate of unemployment.
Teaching Tips
Though categorizing unemployment as frictional, structural, or cyclical is useful in understanding the
sources of unemployment, the Bureau of Labor Statistics provides estimates of total unemployment. It
does not classify unemployment as frictional, structural, or cyclical.

Extra Solved Problem 9.2

Reasons for Unemployment
Some of the data the Bureau of Labor Statistics collects regarding the reasons people are unemployed
appear in the following table (numbers are in thousands, seasonally adjusted).
Unemployment Reason for Unemployment

Job Losers
Rate On Job New
Year (%) Number Total Layoff Other Leavers Reentrants Entrants
2008 5.8 8,924 4,789 1,176 3,614 896 2,472 766
2009 9.3 14,265 9,160 1,630 7,530 882 3,187 1,035
2010 9.6 14,825 9,250 1,431 7,819 889 3,466 1,220
2011 8.9 13,747 8,106 1,230 6,876 956 3,401 1,284
2012 8.1 12,506 6,877 1,183 5,694 967 3,345 1,316
2013 7.4 11,460 6,073 1,136 4,937 932 3,207 1,247
2014 6.2 9,617 4,878 1,007 3,831 824 2,829 1,086
Source: U.S. Department of Labor, Bureau of Labor Statistics. www.bls.gov
a. Calculate the percentage of the unemployed who lost their jobs (Job Losers) and the percentage
that left their jobs (Job Leavers) from 2008 to 2014.
b. Calculate the percentage of the unemployed who were unemployed as the result of entering the
labor force, either for the first time or as reentrants, from 2008 to 2014.
Solving the Problem

Step 1: Review the chapter material.
This problem is about the sources of unemployment, so you may want to review the section
“Types of Unemployment,” which begins on page 674 in the textbook.
Step 2: Calculate the percentage of the unemployed who lost their jobs and the percentage
that left their jobs from 2008 to 2014.
The percentage of “job losers,” for example in 2008, can be calculated as (4,789/8,924)  100 =
53.7 percent. The percentages for each year are in the second column (Job Losers) of the
following table. The percentage of “job leavers” can be calculated for 2008 as (896/8,924) 
100 = 10.0 percent. The percentages for each year are in the third column (Job Leavers) of the
following table.
Percentage of The Unemployed

Reentrants and
Year Job Losers Job Leavers New Entrants
2008 53.7 10.0 36.3
2009 64.2 6.2 29.6
2010 62.4 6.0 31.6
2011 60.2 7.1 34.8
2012 55.0 7.7 37.3
2013 53.0 8.1 38.9
2014 50.7 8.6 40.7

Step 3: Calculate the percentage of the unemployed who were unemployed as the result
of entering the labor force from 2008 to 2014.
The percentage of reentrants and new entrants for 2008 is [(2,472 + 766)/8,924]  100 = 36.3
percent. The percentages for each year are included final column in the above table. The main
source of unemployment is job losers, followed by reentrants and new entrants. There were
more reentrants—people who lost or quit jobs in the past, dropped out of the labor force and
are now looking for new jobs—than new entrants to the labor force.
Explaining Unemployment (pages 293–295)

9.3 Learning Objective: Explain what factors determine the unemployment rate.
A. Government Policies and the Unemployment Rate

Governments can reduce the level of frictional unemployment with policies that speed up the process of
matching unemployed workers with unfilled jobs. Governments can help reduce structural unemployment
with policies that aid worker retraining. Some government policies, however, can add to the level of
frictional and structural unemployment. In the United States and most industrial countries, the
unemployed are eligible for unemployment insurance payments. The unemployed spend more time
searching for jobs because they receive these payments. Unemployment insurance helps the unemployed
maintain their income and spending, which lessens the personal hardship of being unemployed. In the
United States, unemployed workers are typically eligible to receive unemployment insurance payments
equal to about half of their previous wage for six months, although this period is often extended during
recessions. In many other countries workers are eligible to receive unemployment payments for a year or
more, and payments may equal 70 percent of their previous wage.
In 1938, the federal government enacted a minimum-wage law. If the minimum wage is set above the
market wage, the quantity supplied of labor will be greater than the quantity of labor demanded. As a result,
the unemployment rate will be higher than it would be without the minimum wage. Studies estimate that a
10 percent increase in the minimum wage reduces teenage unemployment by about 2 percent.
B. Labor Unions
Labor unions are organizations of workers that bargain with employers for higher wages and better
working conditions for their members. In unionized industries, the wage is usually above what otherwise
would be the market wage, but most economists believe that this does not result in an increase in the
overall unemployment rate because only about 6.5 percent of workers outside the government sector are
unionized.
C. Efficiency Wages
An efficiency wage is an above-market wage that a firm pays to increase workers’ productivity.
Efficiency wages are another reason economies experience some unemployment even when cyclical
unemployment is zero.

The Graying of the Unemployment Rate
The unemployment rate changes not only as the number of unemployed workers changes (the numerator
of the unemployment rate formula) but also as the size of the labor force changes (the denominator of the
unemployment rate formula). As the textbook notes, there has been a dramatic increase in the number of
women in the labor force since the late 1940s. The participation rate among adult women increased from

33 percent in 1948 to 57 percent in 2016. In the early part of the twenty-first century, the labor force will
be affected by the aging of the “baby boomers”—Americans born between 1946 and 1964. According to
the U.S. Census Bureau by 2050 the number of Americans aged 65 and older is expected to rise to 83.7
million from about 47.8 million in 2015. Despite improvements in health care and the increased life
expectancy of Americans, many older workers are leaving the labor force. In 1960, 78 percent of men
between the ages 60 and 64 and 31 percent of men 65 years and older were in the labor force. Today these
figures are about 55 percent and 17 percent, respectively. The average age of retirement today is 62,
compared to an average age of 65 in 1965.
There are several reasons why many workers today retire earlier than in years past. First, many boomers
have greater disposable incomes than people in other age groups and choose to use this income to
consume more leisure. Second, career advancement becomes more difficult after age 40. Third, over
60 percent of U.S. corporations offer older workers early retirement plans, while only about 5 percent
offer incentives to delay retirement. If these trends continue, the disappearance of baby boomers from the
labor force will have a significant impact on the size of the labor force.
a. What effect will the retirement of the baby boomers have on the unemployment rate?
b. Can the size of the labor force increase despite of the retirement of older workers?
Solving the Problem

This problem is about factors that determine the unemployment rate, so you may want to
review the section “Explaining Unemployment,” which begins on page 677 in the textbook.
Step 2: What effect will the retirement of baby boomers will have on the unemployment
rate?
Holding other factors that affect the labor force constant, as baby boomers retire, the
unemployment rate will rise because the numerator of the unemployment rate formula would
not change much (relatively few baby boomers are unemployed), while the denominator
becomes smaller as the labor force declines.
Step 3: Explain whether the size of the labor force can increase despite the retirement of
older workers.
It is possible, but unlikely, that the labor force will increase due to the retirement of older
workers, because the birth rate in the 1980s and 1990s was less than in the 1950s and 1960s.
To offset the decline in the labor force due to the retirement of the baby boomers, there would
have to be new job seekers—either immigrants or current U.S. residents who had not been in
the labor force.
Measuring Inflation (pages 295–298)

9.4 Learning Objective: Define the price level and the inflation rate and understand how
they are computed.
The price level is a measure of the average prices of goods and services in the economy. The inflation
rate is the percentage increase in the price level from one year to the next. The GDP deflator is the
broadest measure of the price level, but to know the impact of inflation on the typical household, the
deflator can be misleading. Changes in the consumer price index come closest to measuring changes in
the cost of living as experienced by the typical household.

A. The Consumer Price Index

To obtain prices of a representative group of goods and services, the BLS surveys 14,000 households on
their spending habits. The survey is used to construct a market basket of 211 types of goods and services
used by the typical urban family of four. The consumer price index (CPI) is a measure of the average of
the prices a typical urban family of four pays for the goods and services they purchase. One year is chosen
as the base year, and the value of the CPI is set equal to 100 for that year. In any other year the CPI equals
the ratio of the dollar amount necessary to buy the market basket in that year divided by the dollar amount
necessary to buy the market basket in the base year, multiplied by 100. The CPI is sometimes called the
cost-of-living index.
B. Is the CPI Accurate?

The CPI is the most widely used measure of inflation. It is important that the CPI be as accurate as
possible, but there are four biases that cause the CPI to overstate the true inflation rate: substitution bias,
increase in quality bias, new product bias, and outlet bias. The BLS takes steps to reduce the size of the
bias.
C. The Producer Price Index

In addition to the GDP deflator and the CPI, the government also computes the producer price index
(PPI), which is an average of the prices received by producers of goods and services at all stages of the
production process. Changes in the PPI can give an early warning of future movements in the CPI.

Calculating the CPI
The consumer price index (CPI) compares the cost of a market basket of goods in a given year with the
cost of the same market basket in the base year. Suppose that a market basket includes (1) admission for
two to a local theater for a weekend movie, (2) a large box of popcorn at the theater, (3) a large pepperoni
pizza (carry-out from a local pizzeria), and (4) a two-liter bottle of diet Coke.
Theatre
Admission
for One Diet
Year Person Popcorn Pizza Coke
1 $5.00 $2.00 $12.00 $1.25
2 6.00 2.50 12.50 1.40
3 6.50 3.00 13.00 1.50
Assume that Year 1 is the base year. Calculate the value of the CPI for each year and the rate of inflation
for Years 2 and 3.
Solving the Problem

This problem is about using the CPI to calculate the inflation rate, so you may want to review
the section “Measuring Inflation,” which begins on page 679 in the textbook.

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Step 2: Determine the value of the market basket.

The value of the market basket is the sum of the quantity of each good included in the basket
multiplied by its price. The market basket in this example has a quantity of two for theater
admissions, and a quantity of one for each of the other goods. The value of the market basket
in Year 1, the base year, is (2  $5.00) + $2.00 + $12.00 + $1.25 = $25.25. The table in Step
3 lists the value of the market basket for all three years.
Step 3: Calculate the value of the CPI and the inflation rates for Years 2 and 3.
The CPI is the ratio of the value of the market basket in a given year to the value of the
market basket in the base year, multiplied by 100. We can use the CPI to calculate the
inflation rate, which is the percentage change in the CPI from Year 1 to Year 2 and from Year
2 to Year 3. These values are in the following table:
Value of the
Market Rate of
Year Basket CPI Inflation
1 $25.25 100.0 —
2 28.40 112.5 12.5%
3 30.50 120.8 7.4%
Extra
Explaining How the CPI Measures the Price Level and Rate of
Apply the
Inflation
Concept
There are many misconceptions about how the consumer price index (CPI) is constructed and exactly
what it measures. Economists John Greenlees and Robert McCelland addressed these misconceptions in
an article published in the Monthly Labor Review. They explain that “…when prices change, the goal of
the CPI is to measure the percentage by which consumers would have to increase their spending to be as
well off with the new prices as they were with the old prices…” The following information regarding the
CPI and its construction are taken from the Greenlees and McCelland article.
Since 1978, the Bureau of Labor Statistics (BLS) has published the CPI for all urban consumers (CPI-U)
and the CPI for urban wage earners and clerical workers (CPI-W). Though the items and prices included
in both indexes are the same, the weights given to some of the index components differ. The U.S. Census
Bureau administers a Telephone Point-of-Purchase Survey in which consumers are asked where they
recently purchased goods and services. The BLS uses these data to select a sample of grocery stores,
service stations, doctors’ offices and other locations at which to collect prices. Representative samples of
items from these locations are selected and prices of the items are collected regularly by BLS employees.
Individual item-area indexes are constructed and the indexes are averaged together using weights based
on the Consumer Expenditure Survey, which is conducted for the BLS by the Census Bureau.
The all-items CPI-U is the CPI that is reported most widely, but the CPI-U and the CPI-W are both used
to make cost-of-living adjustments. The CPI-W is the index used to make annual Social Security and
federal retirement cost-of-living adjustments and is often used for periodic wage adjustments in collective
bargaining agreements. The CPI-U is used for indexation of tax brackets and personal exemption amounts
in the federal tax system. CPI data are also used in the construction of the National Income and Products
Accounts (NIPA). For example, CPI component indexes are inputs into the NIPA Personal Consumption
Expenditures (PCE) price index and are used in the calculation of real GDP.

In 2002, the BLS began publishing the chained Consumer Price Index for urban consumers (C-CPI-U).
This more closely approximates a cost-of-living index by reflecting consumer substitution among item
categories. Over time, some goods and services consumers commonly bought are replaced by new goods
and services. Adjustments to the CPI must be made to avoid having a shrinking market basket that is
unrepresentative of what consumers are buying. For many food items, the substitution is facilitated
because the BLS measures prices on a per-ounce or per-pound basis, rather than a per-item, basis.
Greenlees and McCelland use a simple example of a maker of a candy bar that replaces a 1-ounce bar
with a 1.5-ounce bar that sells for the same 75 cent price. The BLS would record a 50 percent increase in
price rather than recording that the price of the bar had not changed. More complicated adjustments are
required when an item, such as a standard-definition television set, is replaced in a store by a high-
definition set that has a much higher price, but also higher quality. The BLS uses sophisticated techniques
to estimate how much of the price difference is due to the higher quality of the set, rather than an increase
in price for a given quality.
Source: John S. Greenlees and Robert B. McCelland, “Addressing misconceptions about the Consumer Price Index,” Monthly
Labor Review, August 2008, pp. 3–19.
Using Price Indexes to Adjust for the Effects of Inflation (pages 298–300)
9.5 Learning Objective: Use price indexes to adjust for the effects of inflation.
Price indexes give us a way of adjusting for the effects of inflation so that we can compare dollar values
from different years. To correct for the effects of inflation, we divide a nominal variable by a price index
and multiply by 100 to obtain a real variable. Economic variables that are calculated in current-year
prices are referred to as nominal variables.

Calculating Real Wages at Caterpillar
In 2013, Caterpillar and the United Steelworkers Union signed a labor contract that froze the wages of
caterpillar workers for six years. In 2013, the average wage at Caterpillar was about $27 per hour and the
CPI was 233. Suppose the CPI rises to 260 in 2018, the last year of the contract. Calculate the percentage
change between 2013 and 2018 in the real wage earned by an average Caterpillar worker. Be sure to
explain what the values you calculate for the real wage represent.
Solving the Problem

This problem is about using price indexes to correct for the effects of inflation, so you may
want to review the section “Using Price Indexes to Adjust for the Effects of Inflation” that
begins on page 682 in the textbook.
Step 2: Begin by defining the real wage in 2013 and 2018 and explaining what the
values of the real wage represent.
The number of dollars a worker receives is the worker’s nominal wage. To calculate the
worker’s real wage, we have to divide the nominal wage by the CPI for that year and multiply
by 100. We can make the following calculations for the two years:

For 2013:
 $27 
   100 = $11.59
 233 
For 2018:
 $27 
   100 = $10.38
 260 
The base year for the CPI is the average of prices during the period 1982–1984. So, the
values for the real wage we calculated are in 1982–1984 dollars. In other words, these values
for the real wage tell us that in 2013, $27 would buy what $11.59 would have bought in
1982–1984, and that in 2018, $27 would buy what $10.38 would have bought in 1982–1984.
Step 3: Complete the answer by calculating the percentage change in the real wage
Caterpillar workers will receive.
This percentage change equals:
 $10.38 − $11.59 
   100 = −10.4%.
 $11.59 
We can conclude that if the estimate of the CPI in 2018 is correct, an average Caterpillar worker
will experience about a 10 percent decline in his or her real wage between 2013 and 2018.
Extra Credit: The values we computed for the real wages Caterpillar workers earn are measured in
1982–1984 dollars. Because this period is more than 30 years ago, the values are somewhat difficult to
interpret. We can convert the earnings to 2013 or 2018 dollars by using the method we used earlier to
calculate your mother’s salary. But notice that, for purposes of calculating the change in the value of real
average hourly earnings over time, the base year of the price index doesn’t matter. The change from 2013
to 2018 would still be −10.4 percent, no matter what the base year of the price index was. If you don’t see
that this is true, test it by using the mother’s salary method to calculate the real wage for 2013 and 2018 in
2013 dollars. Then calculate the percentage change. Unless you make an arithmetic error, you should find
that the answer is still −10.4 percent.
Question
In 1924, the famous novelist F. Scott Fitzgerald wrote an article for the Saturday Evening Post titled
“How to Live on $36,000 a Year,” in which he wondered how he and his wife had managed to spend all
of that very high income without saving any of it. The CPI in 1924 was 17, and the CPI in 2012 was 230.
What income would you have needed in 2012 to have had the same purchasing power that Fitzgerald’s
$36,000 had in 1924? Be sure to show your calculation.
Source: F. Scott Fitzgerald, “How to Live on $36,000 a Year,” Saturday Evening Post, April 5, 1924.
Answer
We can convert Fitzgerald’s 1924 nominal income of $36,000 to an equivalent income in 2012 by
multiplying the 1924 nominal income by the ratio of the CPI for 2012 to the CPI for 1924: $36,000 ×
(230/17) = $487,059. So, you would have needed an income of $487,059 in 2012 to have the same
purchasing power that Fitzgerald’s $36,000 had in 1924.

Nominal Interest Rates versus Real Interest Rates (pages 301–302)

9.6 Learning Objective: Distinguish between the nominal interest rate and the real interest rate.
The difference between nominal and real values is important when money is being borrowed and lent.
Because it is corrected for the effects of inflation, the real interest rate provides a better measure of the
true cost of borrowing and the true return to lending than does the nominal interest rate. The nominal
interest rate is the stated interest rate on a loan. The real interest rate is the nominal interest rate minus
the inflation rate. For the economy as a whole, we can measure the nominal interest rate as the interest
rate on three-month U.S. Treasury bills. The nominal interest rate will be less than the real interest rate
when the inflation rate is negative. Deflation is a decline in the price level.

Computing the Real Rate of Interest
The real interest rate is defined as the nominal interest rate minus the inflation rate. The textbook uses the
three-month interest rate on U.S. Treasury bills (short-term loans investors make to the federal
government) as a measure of the nominal interest rate. The table below contains the average annual
interest rate on three-month Treasury bills (T-bills) and the percentage change in the consumer price
index (CPI-U) for 1981, 1984, and 1985 (years of relatively high nominal interest rates) and 2014, 2015
and 2016 (years of relatively low nominal interest rates).
1981 1984 1985 2014 2015 2016

Interest rate on three-month T-bills 14.03 9.52 7.48 0.03 0.05 0.32
Percentage change in the CPI-U 10.38 4.37 3.53 1.61 0.12 1.28
Source: https://fred.stlouisfed.org/
a. What was the real interest rate in the years 1981, 1984, 1985, 2014, 2015, and 2016?
b. In which of these years was the real interest highest? In which years was the real interest rate
negative?
Solving the Problem

This problem refers to real and nominal interest rates, so you may want to review the section
“Nominal Interest Rates versus Real Interest Rates,” which begins on page 678 of the textbook.
Step 2: Calculate the real interest rate for the years 1981, 1984, 1985, 2014, 2015, and 2016.
Real interest rates for the given years are
1981 1984 1985 2014 2015 2016
3.65 5.15 3.95 −1.58 −.07 −0.96
Step 3: In which of these years was the real interest rate highest? In which years was the
real interest rate negative?
The real interest rate was highest, 5.15 percent, in 1984 and was negative in 2014, 2015, and
2016. A negative real interest rate means that lenders are receiving a negative real return on
funds they have loaned. Eventually, nominal interest rates must rise to make the real interest
rate positive. At some point investors will demand a positive interest rate in order to convince
them to keep buying Treasury bills.

Extra
Low Real Interest Rates on Treasury Debt Force Investors to
Apply the
Consider Alternatives
Concept
The federal government’s deficit declined from $1.4 trillion in fiscal year (October 1–September 30) 2009
to $439 billion in fiscal year 2015. Although the size of deficit fell, the total national debt climbed to over
$19 trillion in 2016. The U.S. Treasury has to sell hundreds of billions of dollars in securities annually to
pay interest on this debt. Holding the demand constant, an increase in supply of Treasury securities will
lead to lower prices and higher interest rates. But because the demand for Treasury securities also
increased, interest rates remained low throughout 2015. Low real interest rates encourage firms and
consumers to borrow to fund construction of new buildings, equipment and purchases of automobiles and
other durable goods. But bondholders and retirees who seek steady income view low real interest rates on
Treasury securities differently. William Gross, cofounder of PIMCO, the world’s largest bond fund
advised bondholders to “. . . find something else that’s attractive.” While Princeton economist Burton
Malkiel agreed that U.S. Treasury securities are currently poor choices for investors, he endorsed two
other types of bonds: (1) Tax-exempt municipal bonds, issued by state and local governments, that offer
yields higher than those on Treasury debt, some of which are tied to reliable sources of revenue (for
example, bridge and tunnel fees) and are free of state and local taxes and (2) bonds issued by foreign
countries that are in better fiscal condition than the United States. Australia, for example, has a low debt-
to-GDP ratio and abundant natural resources that can be used to fuel economic growth. Malkiel suggests
that another strategy for savers: buy a portfolio of blue-chip common stocks that offer dividends.
Sources: Matt Phillips, “Real Interest Rates: 1919–The Present,” Wall Street Journal, October 13, 2011; Burton G. Malkiel, “The
Bond Buyer’s Dilemma,” Wall Street Journal, December 7, 2011; Matt Cover, “At Current Rate of Federal Borrowing,
Government on Track to Hit Legal Limit on National Debt on March 14,” cnsnews.com, February 24, 2011; and “U.S. deficit
falls to $680 billion,” CNNMoney, October 30, 2013.
Does Inflation Impose Costs on the Economy? (pages 302–306)

9.7 Learning Objective: Discuss the problems that inflation causes.
A. Inflation Affects the Distribution of Income

Although inflation does not reduce the affordability of goods and services to the average consumer, it still
imposes costs on the economy. Inflation affects the distribution of income. Some people will find their
incomes rising faster than the rate of inflation, and so their purchasing power will rise. Other people will
find their incomes rising slower than the rate of inflation, so their purchasing power will fall. The extent
to which inflation redistributes income depends, in part, on whether the inflation is anticipated.
B. The Problem with Anticipated Inflation

When inflation is anticipated, its main cost is that paper money loses value. Anyone holding paper money
will find its purchasing power decreasing each year by the rate of inflation. To avoid this cost, workers
and firms try to hold as little money as possible. Firms that print catalogs listing prices of products will
have to reprint them more frequently. Stores will devote more time and labor to changing prices. Menu
costs are the costs to firms of changing prices. Anticipated inflation raises taxes paid by investors because
they are taxed on the nominal payments they receive rather than on the real payments.
C. The Problem with Unanticipated Inflation

When people borrow money or banks lend money, they must forecast the rate of inflation so they can
calculate the real rate of interest on a loan. When the actual inflation rate turns out to be different from the
expected rate, some people gain while other people lose. This apparently unfair redistribution is a key
reason why people dislike unanticipated inflation.

Exploring the Variety of Random
Documents with Different Content
Ye forty thousand gods, E kini o ke ’kua,
Ye four hundred thousand gods, E ka lehu o ke ’kua,
Ye rows of gods, E ka lalani o ke ’kua,
Ye collection of gods, E ka pukui o ke ’kua,
Ye older brothers of the gods, E ke kaikuaana o ke ’kua,
Ye four-fold gods, E ke kokoo-ha o ke ’kua
Ye five-fold gods, E ke koo-lima o ke ’kua,
Take away my good looks and E lawe ae oukou i kuu kino
keep it concealed. maikai, huna oukou a nalo,
Give me the form of an old Haawi mai oukou i kino luahine
woman, bowed down in age and no’u, kolopupu, haumakaiole.
blear-eyed.
At that very moment she was Ia wa, lilo iho la keia i luahine a
transformed into an old woman make loa me kahi hulilau
wandering along the seashore kahakai, me kahi laau ohiuhiu
with a stick in her hand picking ina, wana. I loko o ka loko ia a
out sea-eggs. Kahalaokolepuupuu, he
aholehole ka ia, he nehu, he iao,
Within this fish pond owned by na ia a pau loa, me ka limu, hao
Kahalaokolepuupuu, were kept ae la ka mana o
the aholehole, 9 nehu, 10 iao, 11 Laukiamanuikahiki, pau a
and all fish of this species and panoonoo ka loko.
moss. Through the supernatural
powers of Laukiamanuikahiki all Iaia e kokolo ana me kahi hulilau
the fish in the pond disappeared, ma ke kahakai, hiki mai la na
which left the pond without a elele a Kahalaokolepuupuu, a
single fish. While she was kahea ana: “E kahi luahine, pau
crawling along the seashore two loa ka ia a ke ’lii wahine ia oe,
messengers from aihue maoli oe e na wahi
Kahalaokolepuupuu arrived and luahine.” I aku keia: “Aole na’u,
called out: “Say, you old woman, he pau kahiko no ko ka ia o keia
you have taken all the queen’s loko, o ko’u hele ana mai nei,
fish. You are a thieving old kapili oukou i pau ia’u.” I loko o
woman.” She replied: “I did not keia wa, loaa hou kekahi inoa o
take them. The fish from this ia nei, mai na elele mai, o
pond disappeared long before Lipewale, he mai no
this; but since you have seen me Kahalaokolepuupuu. Olelo mai
here you are attributing their na elele: “E pii kakou i ka hale; o
disappearance to me.” At this kou inoa, o ka inoa o ka mai o
time she was given a new name, ke ’lii wahine, o Lipewale.”
Lipewale, by the messengers.
They then said to the old A hiki lakou i ka hale, olelo aku
woman: “Let us go to the house, la na elele: “Aohe ia i koe o ka
your name, Lipewale, is that of loko, ua pau i nei wahi luahine, e
the queen’s sickness.” When they noke ana keia i ka ohiu i ka ina, i
arrived at the house, one of the ka wana.” I mai o
messengers said: “There is not a Kahalaokolepuupuu: “E kahi
single fish in the pond, all have luahine, o ka inoa o kuu mai o
been taken by this old woman. Lipewale, o kou inoa ia, ea, he ai
When we found her she was ia’u, he kapa, he hale, noho no
taking the sea-eggs.” kaua.”
Kahalaokolepuupuu then
addressed the old woman
saying: “I am going to call you
Lipewale, the name of my
ailment. You will take this name,
will you not? I will supply you
with food, clothing, house to live
in and you will live with me.”
That night when they retired, Moe iho la lakou i ka po, hele
Kahikiula approached the place mai la o Kahikiula ma kahi o
where Lipewale was sleeping Lipewale e moe nei, lele iho la
and kissed her. She then cried honi i ka ihu, kahea ae keia:
out: “Who is kissing me?” Upon “Owai keia e honi nei ia’u?”
hearing this Kahalaokolepuupuu Kahea mai o
called out: “What is it, Kahalaokolepuupuu: “E Lipewale,
Lipewale?” But she would not heaha ia?” Paa loa ko ia nei
answer. In doing this Kahikiula waha, aohe ekemu aku. Ma keia
showed that he had recognized ano kino luahine o ia nei, ua ike
his sister, Laukiamanuikahiki. mai no o Kahikiula ma na
[606] hiohiona maka, a ua maopopo
no iaia o ke kaikuahine o
Laukiamanuikahiki. [607]
This was carried on for several Pela ka ia nei mau hana i na po

nights. Whenever she knew that a pau loa; ina e ike keia e moe
her brother and sister-in-law pu ana ke kaikunane me ka
were about to retire together, wahine i kahi hookahi, ala ae la
she would get up and rattle the keia hoonakeke i na paipu, holo
calabashes forcing her sister-in- mai la ke kaikoeke ninau, hai aku
law to come and ask her reason la keia he iole; no ka mea, he
for thus creating a disturbance; huhu keia i ka moe pu o laua la.
when she would say, that it was
a rat; she did this because she
did not want them to sleep
together.
One day Kahalaokolepuupuu said I mai la ke kaikoeke: “E Lipewale

to Laukiamanuikahiki: “Say, e pii kakou i kukui kapala no kuu
Lipewale, let us go up and get pau, i uka.” Ae aku la keia: “Ae.”
some kukui nuts to print my pa- A hiki lakou i uka, hoiliili iho la a
u with.” Lipewale consented to loaa ke kukui, hana iho la a
this. When they arrived at the haawe, olelo mai lao
place, they collected the kukui Kahalaokolepuupuu: “E Lipewale,
nuts and put them into a bundle. ia oe ke kukui a kakou e haawe
After this was done ai.” “Ae, ia’u.” Kaha aku la lakou
Kahalaokolepuupuu said to la iho, kaa iho la o Lipewale
Lipewale: “You will have to carry mahope me ka haawe kukui.
our bundle of kukui nuts.” “Yes, I Wehe ae la keia a hamama
will take it.” The others then malalo o ka haawe ka waha,
went on ahead leaving Lipewale hookomo aku la na lima i ka
behind with the bundle of nuts aweawe, a iho aku la, ka ke
tied to her back. After she kukui helelei no a hiki i ka hale,
started on her way, she put her pau loa.
hands behind her back, opened
the bundle and allowed the “Ea! Auhea kau kukui e
kukui nuts to drop on the road. Lipewale?” I aku keia: “Ka, o ka
When they arrived at the house oukou hana ana no a paa i ka
all the nuts were gone. Upon aweawe, kau no ma ke kua iho
being questioned: “Say, mai nei au. Aole o’u maka ma ke
Lipewale, what has become of kua e ike ai au i ka helelei o ke
your kukui nuts?” She answered: kukui.” I aku o Kahalaokepuupuu
“You fixed the bundle and I put ia Lipewale: “E noho oe e kapala
it on my back and followed i kuu pau, e iho makou e auau
behind you. I have no eyes at kai.” Noho iho la keia kapala i ka
my back to see whether the nuts pau, kii aku la keia i ka lepo
were falling out of the bundle or puaa a me ka lepo palahu, hoi
not.” mai la kapala, ma ka loa kekahi
ohe, ma ka laula kekahi ohe,
After this Kahalaokolepuupuu alua kakau o ke kapala ana. A
said to Lipewale: “You will have liuliu, iho aku la keia mahope e
to stay home and print my pa-u auau kai; lawe ia ae la ke kino
while the rest of us go down and inoino luahine o ia nei, kuu ia iho
have a sea bath.” Lipewale was la ke kino maikai; iho aku la keia
therefore left behind to print the a hiki, a kokoke ia lakou la, pipa
pa-u. She first went out and got ae la keia he wahi e ae, auau iho
some filth and came back and la keia a pau, hoi mai la no.
proceeded to carry out the order
by smearing the bambu sticks Alualu mai la lakou la mahope,
lengthwise and crosswise and aohe launa mai iaia nei, hiki mua
began the printing of the pa-u. aku la keia a ka hale, lawe ia ae
This did not take very long, so la ke kino maikai, kuu ia iho la
she followed along behind the ke kino luahine. A hiki lakou la,
others and went in sea bathing. ninau mai la: “Ea! Aohe oe i ike i
On the way down to the sea, she keia wahine maikai i pii mai nei,
caused herself to be transformed makai mai nei?” “Aole au i ike, i
back to her usual self and she ka noho iho la no wau ma waho
again possessed all her beauty. nei la a puka mai la oukou.”
She continued on down and
when she was near the others I mai la o Kahalaokolepuupuu:
she passed on by and bathed at “E hele makou e hula, e noho oe
some distance from them. When i ka hale o kakou, mai haalele
she was finished she went right oe,” ae aku la keia, “ae.” A hala
along up home. When the others lakou la i ka hale hula, noho iho
saw her returning home they la keia me ke kaikunane me
chased on behind, but they Kahikiula, puka ae la keia a waho
could not catch up and she o ka hale, kahea.
arrived at home some time
before the others, when she was
once more transformed into the
form of an old woman. When the
others arrived at home, they
asked her: “Say, did you see a
beautiful woman who came up
this way from below?” “No, I
have not seen her. I have been
sitting out here all this time until
you returned.” After the others
had gone to the dancing house
she remained with her brother
Kahikiula. She went outside of
the house and called out:
Ye forty thousand gods, E kini o ke ’kua,
Ye four hundred thousand gods, E ka lehu o ke ’kua
Ye rows of gods, E ka lalani o ke ’kua,
Ye collection of gods, E ka pukui akua
Ye four thousand gods, E ka mano o ke ’kua,
Ye older brothers of the gods, E kaikuaana o ke ’kua
Ye gods that smack your lips, E ke ’kua muki
Ye gods that whisper, E ke ’kua hawanawana,
Ye gods that watch by night, E ke ’kua kiai o ka po,
Ye gods that show your E ke ’kua alaalawa o ke aumoe
gleaming eyes by night, E iho, e ala, e oni, e eu,
Come down, awake, make a Eia ka mea ai a oukou la, he
move, stir yourselves, hale.
Here is your food, a house. [609]
[608]
At that very moment her beauty Ia wa, hoi mai la ke kino maikai
was restored to her, while the o ia nei a pili, hao mai la ke ’kua,
gods set fire to the dancing pau ka hale i ke ahi, pau ka hale
house, consuming the house, hula, pau ke kaikoeke, na mea a
her sister-in-law and all the pau i olelo ino iaia nei, pau loa i
people who had insulted her; ka make.
they all perished.
After this Kahikiula called out to Kahea mai ke kaikunane o

his sister: “Come in, Kahikiula iaia nei, “hoi mai kaua
Laukiamanuikahiki.” She refused, e Laukiamanuikahiki,” hoole aku
saying: “I will not come to you, keia, “aole au e hoi aku me oe, i
for you have caused me to suffer mainoino ka hoi au i kou hale.
in your own home. Here I am Eia au ke hoi nei i Kuaihelani.”
returning to Kuaihelani.”
In this legend, it is seen that it E like me na mea i olelo ia i loko
was not considered wrong for a o keia kaao, pela no na mea o
brother to take his sister to wife. keia wa e noho nei, ka moe
It is also seen that they also kaikunane, kaikuahine, ka
suffered in those days just as we mainoino, ka hana aloha ole, a
do in these days. They also me na hana he nui loa. Nolaila,
hated one another and in fact ua lilo keia i kumu alakai no ka
lived as we now live. 12 Therefore poe hou o hope loa nei.
these customs of days gone by
are guidings for after
generations.
[i]
[597]
1 Laukiamanuikahiki, literally, bird-

trapping leaf of Kahiki. ↑
2 Another story of an absenting father
leaving tokens of identification for
his unborn child. ↑
3 Red, the unmistakable evidence of
royal rank. ↑
4 A foreknowledge, evidently, of the
sex of his child. ↑
5 A duplicate of the Umi-a-Liloa story,
except in sex of the child. ↑
6 Haku, rendered “lord,” is applicable
to either sex; it signifies ruler,
overseer, or other authoritative
superior. ↑
7 Ilima, a Sida of which there are
several species; a favorite flower for
wreaths, and Oahu’s chosen emblem.
The introduction of the marigold
reveals the modern authorship of this
story. ↑
8 Expressions of admiration. ↑
9 Aholehole, a small white fish (Kuhlia
malo). ↑
10 Nehu, silversides (Atherina). ↑
11 Iao, very small fish. ↑
12 This legend closes with a mis-
statement of modern life resembling
in all respects that of ancient times in
the effort to show that human nature is
the same. Civilization, law and order
and education overcame pagan
customs many years before the
foregoing was written. ↑
[Contents]
INDEX
A, the source of, 32;
indicates family connection, 32.
Aa, 420;
rubble lava, 104.
Aaka, bastard sandalwood, 566.
Aalaloloa cliffs, 484.
Aalii, forest tree of fine durable wood, 390.

Ku not like the, 390.
Ae kai, sea beach, 36.
Aeloa, favorite wind of Kohala, 568.
Aha, company, 388;

horizon, 372.
Ahaula, cord, recognize beauty in a contest, 552.
Ahe, breeze, 376.
Ahewahewa, 560;
also killed, 564;
mamane the wood of umu for, 566.
Ahi (Germo germo), 292, 296, 298.

wreathed by Lono, 298.
yellow-gilled, of Umulau, 298.
Ahihi, motherless, 390.
Ahikanana, champion, 76.
Ahiu, wild, 378.
Aho, house battens, 388.

Aholehole, fish (Kuhlia malo), 366, 604.
Ahu, a heap of stones, 400.
Ahua-a-Umi, temple or memorial, 232.
Ahuawa heap, 566, 568.
Ahukaiolaa, 14.
Ahukinialaa, 4, 8, 10, 14.
Ahulukaaala, 24, 380.
Ahulumai, 14.
Ahupuaa, chief of, cautioned, 422.

larger than an ili of land, 422, 430.
Ahuula, feather robes, 384.
Ai, not to eat, but to possess, 394.
Aiai, at manhood becomes husband of Kauaelemimo, 556.

directs his wife to secure the stolen hook, Kahuoi, from her father, 556.
found and brought up by Kauaelemimo, 556.
legend of, 554, 558.
rejoices at his days of poverty being over, 556, 558.
sends his wife for a ten-fathom canoe, 558.
son of Kuula and Hina, 554.
thrown at birth in stream below Kaumakapili, lodges on the rock Nahakaipuami,
556.
with the bird and pearl fish-hook, loads the canoe deep with aku, 558.
Aiea, 400.
Aihakoko, 25;
attendant of, killed by Piilani, 232;
mourns on the ocean and lands in Kapaahu, hence the name Kalua-o-, 232.
of Umi and Piikea, 228, 405.
Aikane, 25, 404.

Aiku or Iku, 32.
Ai pioia, food of departed spirits, 80.
Aka, spirit, 370.
Akahiakuleana, beautiful woman, a very, 178.

begat children after Umi, 220.
defilement, days of, just over, 178.
genealogical tree of, 180.
gives birth to Umi, 180.
husband of, again beats Umi, 182;
is told that Umi is Liloa’s child, 182;
thought the child his, 180.
Kuleanakupiko, father of, 180.
Liloa asks Umi after, 184.
Liloa instructs, regarding child and leaves tokens for identification, 180.
Liloa meets and seduces, 178;
sees her to be with child, 180.
living at Kealakaha, 186.
mother of Umi, 14, 25, 178, 405;
of high blood related to Liloa, 180.
obscure rank of, 220.
Omaokamau sent by, as companion, 182.
proofs left, by Liloa, shown, 182.
protests at harsh treatment of Umi, 182.
sent for to reside at court, 220.
Umi outfitted and directed by, to meet his father, 182;
told by, that Liloa is his father and consents that he go and see him, 182.
Akahiilikapu, daughter of Umi, 228.
Akaka fishing grounds off Kailua, Oahu, 290.
Akalana, 24, 404.
Akimona or Inamona, 586.
Aku, bonito (Gymnosarda pelamis), 488, 570.

(fish) the bird Kamanuwai lived on, 554.
fishing, pearl hook for, 562, 564.
jumped into the canoe until it was loaded down deep, 558.
Kauaelemimo longing for, sends Aiai fishing, 556.
pearl fish-hook Kahuoi, enticing for, 554.
Akua (deity), Kauila ko, a temple ceremony, 200.
Ala stone in cave of Umi, hewn for his tomb, 232.

a flint kind of basalt rock, for adze, etc., 232.
a variety or species of taro (Colocasia antiquorum), 532.
Alae, Maui taught art of making fire by the, 370.

of Hina, 370;
the mud-hen, 400.
Alaea, red rain, 398.
Alaeloa, 284, 302.
Alahee, digger, of hard wood, 398.
Alaikaaukoko, 25.
Alaikauakoko, 180, 405.
Alakapoki, 372.
Alala describes various games, 450;

father of Pikoiakaalala, 450;
questioned as to cause of shouts at sport contests, 450;
makes a koieie board for his son, 452;
refusing at first, permits Pikoiakaalala to join, 452.
Hawaiian crow, 588.
Alamihi, 378.
Alani, 566, 568.

bark and wood of medicinal properties, 566.
Alapai drank the sea up dry, 398.
Alapoki, 372.
Albino, sacred, 4, 8.
or Kekea, 8.
Alelekinana, child of Hoamakeikekula, born a wooden image, 538.

gave people of Kohala the idea of idols and idol worship, 540.
Alenuihaha Channel, 218, 350;

red from the many canoes, 506.
Alexander (historian), on Umi’s temple, 232.
Alia, name of two sticks carried as emblems, 282.
Aliaomao, or Aliaopea, god of the year, 282.
Alii aimoku, 178;

bones of, enshrouded and decorated, 314.
Aloalo, 374.
Alocasia macrorrhiza, 40.
Aloha, modern term of salutation, 54. [ii]
Aloiloi, 100.
Alokio, definition of term, 106.
Alo-o-ia progenitors of the Albinos, 4.
Altar, don’t put this man on the, 140;

for sacrifice, 148.
god, tongue of, seen oscillating beneath the, 222.
Hakau and others sacrificed by Umi on the, 214.
Kaialea and brothers led to base of the, 148;
ordered sacrificed on the, 138, 144.
Kanaloapulehu killed and laid on the, 326.
Kila stood at base of the, 144.
no sacrifice today for the, 148.
onward and stand on the, 346;
meaning thereof, 346.
Paiea offered as a sacrifice on the, 214.
Ama or aama, mullet, 584.
Amama, Fornander’s treatise on, 60.

from hamama, 400.
ua noa, ending form of prayers, 60.
Anaehoomalu, 320, 322, 340, 360.

battle ground, 340;
Lono met Kapaihiahilina at, 360, 362.
mound of rocks at, 362.
Anahola, bird swamps of, 398.
Anahulu, ten-day period, 162, 380, 464, 560.
Ancestor, royal, 284.
Anchovia purpurea, 224.
Ancient custom of entertaining distinguished guests, insight of, 192.
Andrews, 54, 110, 156, 394.
Anea, effect of the wind, 388.
Anekelope (antelope), 102.
Anger, Kualii urged to spare his, 388.
Anuu, tall skeleton-framed temple structure, 148.
Aoa, wind, 376.
Apane, catching the, 398.
Ape (plant), 40;

two leaves bear a large and a small land, 40.
Apiki defined, 102.
Apua, deserted, 384;

on Kau boundary of Puna, 384.
Apuakohau, temple of Muleilua at, 330.

Apukapuka, 378.
Arrow, Aukelenuiaiku’s, 36.

game, 34, 120, 258.
of sugar-cane top, 258.
use of, described, 258.
Arrows from sugar-cane blossom-stalk, of two kinds, 120.
Ashes, ship and brothers of Aukele turned to, 54.

cause enemies to turn to, 42.
dog Moela reduced to, 60.
war dress of Aukelenuiaiku, 54.
Asia, 40.
Atherina (Nehu), 604.
Auaulele, haao rain peculiar to, 398.
Auhuhu (Theprosia purpurea), a poisoning shrub, 464.
Aui, at the slaughter of, 384, 416.
Aukelenuiaiku, or Aukele, ape leaves, brings two, 40.

appearance and strength of, 36.
arrival at Holaniku foretold by, 50.
ashamed at return of, the brothers build them a ship, 44.
ashes, puts on war dress of, 54;
reduces dog Moela to, 60.
asks charge of the ship, 50.
attacked by queen’s guard, 58, 60.
axe on his wife, is asked to test, 68.
back to life, proceeds to bring brothers, 96.
bathing with his wife, goes to see his god, 64.
benefits received on return of, in facing death, 42.
bird-brothers and servants greeted by, 54, 56.
brethren, and, 32;
assured of ruling over his, 40;
hated by his, 32.
brother (angry) of, traps him in water hole, 44.
brothers of, ashamed at his return, build them a ship, 44;
they resist his counsel, 52;
wrestles with his brothers, 36;
will cause their death, 40.
brothers’ vain effort to hurt, 36.
building, shoots his arrow into, 34.
called home, 96.
club of, furnishes meat and drink, 50.
companions cautioned against their cravings by, 66.
contests, goes secretly to see, 34.
coral covering grandmother broken by, 108.
cunning, benefited by, 62, 72.
danger, saved from threatened, 58;
warned by his god of, 54, 56, 58, 64.
death of his brothers, will cause the, 40.
defeats his brothers, 36.
deceiver, 102.
dog Moela, discovered by, 56;
reduced to ashes, 60.
down-hearted, refuses food, 82.
dreams of his nephew and weeps, 80.
earmarks of great antiquity, 32.
earth, returning to, 86.
eating-house, entered by, 68.
escapes death designed by his brothers, 38.
exhausted, reaches shore, 54.
experience, meets with a queer, 102.
father, grief of, who mourns many days for, 42.
favorite of his father, 32.
fishing, devotes himself to, 100.
flight to heaven arrives first, on his, 76;
fell into space and lost, 84;
gets entangled on his return, 94, 96.
flight to obtain water, instructed in, 88, 90.
fly, taught how to, 72;
successful, 74.
gives his lands and wife to brothers, 98, 100.
god Lonoikoualii and, 42, 54, 56, 58.
god of, all-powerful, 58.
god, warned by his, of danger, 54, 56, 58, 64.
gods, prays to Namakaokahai and brothers as, 60, 62.
grandmother, coral covering his, broken by, 108.
of Iku asked by, 100.
outfitted by lizard, 42.
grandson of Kamooinanea, 38.
greets servants and bird-brothers, 54, 56.
Halulu, caught by the bird, 64;
instructs victims of, for their safety, 64;
plans to and kills the bird, 64, 66.
heaven, arrives first on his flight to, 76.
Holaniku, foretells arrival at, 50.
home, called, 96;
welcomed, 66.
house, invited to enter the, 58.
husband of Namakaokahai, offered as, 58.
Ikumailani, searched for and rescued by, 44.
Iku’s care, kept under, 34.
infatuated with Pele and Hiiaka, 100.
Kamooinanea called by, 108, 110.
Kanemoe desires to accompany, 106.
kingdom, etc., given by Namakaokahai to, 68.
knowledge, evidence of his, 50, 60.
konane, engages in a game of, 56.
Kuaihelani, defiant of, 76;
delays trip to, 106;
hero of, 78;
returns to, 108.
Kuwahailo advised by, to keep his men, 78;
battles with, 72;
seen by, in sacred place, 76;
threatens to kill, 78.
legend of, 32.
liberal nature of, great, 100.
lizard demand granted by, 40.
lizard preservation of, 44.
Luahinekaikapu meets, 90;
restores sight to, 92.
Makalii’s wife, faint and dizzy at beauty of, 80.
moon grasped for safety by, 86.
mother of, refuses to believe him dead, 42.
mourned for, 84;
again as dead, 44.
mourns many days for, grief of father who, 42.
Namakaokahai and brothers prayed to as gods by, 60, 62;
and, utilize the water of life, 68;
cousin of, 42;
given the kingdom, etc., 68;
offered as wife to, 58;
won as wife by, 62;
told of his useful things, 68.
nephew may be saved, hears how, 80.
outfitted by lizard-grandmother, 42.
pacific reply advised by, 52.
[iii]parents, requests leave to visit his, 106.
Pele and Hiiaka met by, 100;
infatuated with, 100.
possessions of his wife given, 74.
preservation of, by the lizard, 44.
rainbow, descent of the cliff by, 66.
refused permission to see sports, 34.
return of, and benefits received in facing death, 42.
robbed of his catch of birds, 44.
sails with his brothers, 46, 48.
saves himself from the doomed ship, 52, 54.
secretly, goes to see his brothers’ contests, 34.
sleeps under ekoko tree, 54.
son of, admonished, 98.
spirit, over anxious to catch the, 80, 82.
surprised that death does not occur, 70.
trouble, overcome, how rewarded, 56.
voyage, one day and night on, 78.
war dress of ashes, puts on, 54.
water of everlasting life, secures the, 92;
seeks the, 82, 86, 88, 90.
welcomed home, 66.
wife, is asked to test axe on his, 68;
lives happily with his, 66, 74;
reluctantly chops up his, 68, 70;
tries to deceive his, 100.
wife’s supreme powers, in fear admires, 70.
wishes child named after his god, 74.
Aukuu, fish-hawk (Ardea sacra), 396.
Auwahi, 286, 304.
Awa, drinking of the, 398;

Kama and Lono wish to drink, together, 332.
lau hinano, fragrant, 358.
masticated, 332;
satisfying quality of, 358.
milk-fish (Chanos chanos), 464, 482.
of Koukou, 358.
(piper methysticum), 534.
real and the kind that grows on trees, 580.
rough-barked kukui, like a man who drinks, 390.
that withers the skin, 398.
Aweoweo (Chenopodium sandwicheum), a shrubby plant, 456.
Bambu, Laukia stepped off the, 598.

printing sticks, 606.
stalk, a roadway to Kuaihelani, 598.
Laukia climbed to top of, 598.
(the) shot up and leaned over till end reached Kuaihelani, 598.
Banana bud, a Hawaiian ideal of flesh condition, 532;

semblance of personal beauty, 40.
of Kaea, he is the shrivelled, 334.
Bananas kapued, 66.
Battle, being fought at Paia, 430.

final at Pelekunu, 420.
ground looked over by Kualii, 414.
Kawaluna, 410, 412; first, of Kualii, 412.
Lonoikaika sends message of coming, 410.
of Kukaniloko, 430.
place of, prearranged, 366.
prepared by Haloalena declared off, 426.
robe, 52.
Battles fought by Kualii related in mele, 420.

Kualii took part in several, unrecognized, 428;
witnessed these unknown, 428.
Kualii’s, 212, 214, 218.
of Lonoikamakahiki, 322, 324;
of Kaheawai, 322;
Kaiopae, 328;
Kaiopihi, 326;
Kaunooa, 322;
Puukohola, 326;
Puupa, 324, 326.
Beautiful and fruitful lands, 40.
Black pig, means of identifying royalty, 188.
Breezes, various, and effects, 390.
Bird, anatomy of Kukahaulani, 286, 304.

catcher is speedy, 398.
catchers and fishermen, 380;
unskilled ridiculed, 380;
likened to mice, 396.
catching youngster, methods of, 380.
skeleton storehouses of the king destroyed, 422.
tax proclamation, 422;
procedure, 422.
Bird-brothers of Namakaokahai advise sending maid-servants in search, 54.

Aukele admonished in his course by, 62.
dog’s alarm, sent to inquire object of, 56;
of ship’s coming, 52.
greetings of, to Aukele, 56.
human form assumed by, 60.
Kuwahailo’s inquiries answered by, 78.
ordered to kill Aukele, 60.
report, 58;
ship to make war, 52.
sister suggested as a wife for Aukele, 56, 58.
Boastings, narrator pauses in his, 284.
Bolabola of Society Islands, 20.
Bone pit, 140.
Bones, concealment of, a matter of trust, 232, 234.

Koi charged to burn and hide Umi’s, 232.
of vanquished chiefs, as evidence, 314, 416, 418, 420.
preservation of one’s, 62, 194.
stripped all his, and put them in the gourd, 316, 318, 320.
Bow and arrows known, 258.
Boy at Kualoa sees and follows Kualii, 428, 430;

to battle, 428;
returns with him to Kailua, 430.
Breadfruit introduced from Samoa, 392.

planted by Kahai at Puuloa, 392.
Brothers-in-law, Aukele’s intentions told, 106.

sent to gather the mourners together, 84.
teach Aukele how to fly, 72.
Brothers of Aukele, 32, 34, 36, 38, 44, 46.

advised of touching land, 50.
announce their ship to make war, 52.
are each defeated in angry contests, 36.
ashamed at his return build them a ship, 44.
Aukele refused charge of the ship, 50;
sails with them, 46.
battle fought by the, and their death, 52.
cruel and merciless, 38.
given Aukele’s wife and lands, 98.
hatred of Aukele, cause of, 34;
resist his counsel, 52.
Namakaokahai, take turns in possession of, 98.
restored to life, 98.
ship and, turned to ashes, 54.
ship of, completed, they prepare to sail, 46.
Brothers of Kila, 146.
Brothers of Namakaokahai, 108.

advised of the killing of Halulu, 66.
answer Kuwahailo and deliver their message, 78.
assume human form, 60.
Aukele admonished in his course by, 62.
change their bird forms, 60.
consent to exhibition of sister’s supernatural powers, 70.
flight of, takes five days and nights, 76.
prayed to as gods by Aukele, 60.
sent to heaven to tell of Aukele’s new possessions, 74.
surprised at action of Aukele, 60.
tell Aukele one power has not been given him, and why, 72.
Calabash, boy addresses and reaches for his, 578;

takes sundry things from the, 580.
(hokeo) described, 576.
Kawalawala, of Lono, 278.
Loli forbidden to uncover the, 278;
of bones of vanquished chiefs, 310, 314, 316, 318;
of your ward, 278.
of clothes, 576;
of kneaded earth, 382, 420;
of professional articles, 574.
things of value in, 584.
Calendar, monthly, varied on the different islands, 372.
Cannibalism, premium on practice of, 564. [iv]
Canoe, 438, 440.

honor seat of, 382.
Lono and Kakuhihewa’s, race, 300;
Lono wins, 300.
of bulrushes, 156.
parts, 582;
shed values, 584.
prayer of Uli, 438.
priestess of Laa, 440.
various kinds, or purposes, 438.
various parts, descriptive, 440.
vines grow, where, 398.
Canoe, double, (a), sent to Kauai to invite Kupakoili to Hawaii, 522.

loaded with feather cloaks, 314.
Moikeha’s, for voyage from Tahiti, 114.
of Kakuhihewa, 290, 294, 298.
of Kana, of ten fathoms, 438.
of Kaumaielieli, 440;
of Lono, 292, 294, 298, 300;
of Wahanui, 516.
on exposure of body of, Uli ordered the people to return, 442.
wagered by Paiea, 212.
with covered platform, 146.
Canoes of Kamalalawalu ordered carried inland and dismantled, 342.

of Kapaihiahilina, 356, 358.
Carangus ignobilis (ulua), gamiest fish, 294.
Cave of Umi-a-Liloa, 232.
Champions of Kuaihelani, 34.
Changing thought, 14.
Chant committed to memory, how, 276.

honoring name of Lono, 288.
Kakuhihewa charged with appropriating a, belonging to others, 282.
Lono, a chief without a, 280;
knows this, 288.
of Koauli, 342;
of Kualii, 30, 158, 364;
of Lonoikamakahiki revealing the bones of vanquished chief of Hamakua,
316;
of Hilo, 316;
of Kau, 318;
of Kohala, 316;
of Kona, 320;
of Puna, 316.
possibly carried to Hawaii by canoe, 288.
taught by Ohaikawiliula, 276, 282, 288.
Chase, a novel method of averting, 482.
Chicken cooked in blood, 332.

Pupuakea unaccustomed to cooking, 332.
Chief born, a great red fowl, 372.
Chief of Hamakua, Pumaia, identification of bones of, 316;

of Hilo, Hilohamakua, 316;
of Kau, Kahalemilo, 318;
of Kohala, Palahalaha, 314;
of Kona, Moihala, 320;
of Puna, Lililehua, 316.
Luaehu, offspring, O great, 370;
O dread, 372.
was a, who begot a, 372.
Chiefess of Kauai, Ohaikawiliula, 274, 276, 282.

of Puna, Kaikilani, 272.
ruling in Hawaii, first instance of, 266.
Chiefs, district, cautioned, 422.

favorite pastime of, 270.
of Hawaii, 270;
in revolt against Lono, 274.
of Kona were at Kohala awaiting, 320.
of note possess name songs, 276.
rebellious, of Hawaii, 320.
sacred or solid, 238.
Chieftainship undisputed, lanipaa, 372.
Circumcision, ceremonies of, 184.
Chætodon ornatissimus, 240.

City of refuge at Honaunau, Kona, 134. first reference to, 134.
Chubby fishermen, nickname for Umi, 230.
Clouds in conflict, 378.
Coast guards, system of, 562.
Coconut grove bends low, 282, 288, 306.

Island, Hilo, ancient place of refuge, 594.
Companions-in-death, 150.
Confession, etc., honest, 184.
Confusion of relationship terms, 316.
Contest centers on play upon words, 586.

challenge to, 576, 578.
of wits, commencement of, 576.
of words, 582, 584, 586, 588, 590, 592, 594.
various tests in, 576–580.
Coral, a chief, foreteller of events, 20.

fished up by Kapuheeuanui, 20.
islands, low, of Lono, 14.
products, the islands, 20.
Corals, islands of the group raised from, 22.
Councilors of war, 222.

and priests retained and cared for by chiefs, 264.
Counting, Hawaiian method of, 364.
Covered by the same kapa (implying marriage), 602.
Crow (Hawaiian), Alala, 588.
Custom for recognition, 180.
Dancing house, after the others had gone to the, 606;

the gods set fire to the, 608.
Days of temple service, 200.
Dead came to life, 168.

gone to bury the, 282, 288, 306.
Deifying the corals to form islands, 22.
Deity, witnessed the weeping of the, 318.
Demigod (a), about, 162.
Demigods of the deep, 160, 162.
Dew, plentiful, of the morning, 306.
Direction, expression indicating, 560.
Disfigurement of the person general on death of a chief, 132.
Dog Moela reduced to ashes, 60.
Dracæna terminalis, 120.
Drum beaten on kapu nights as a sign of sacrifice, 126.

beating by Laamaikahiki, 128.
flute, 154.
Kauila, of the fun-maker, 398.
Laamaikahiki the one to strike the, 126.
notes heard by Kila, 126;
by Moikeha, 128.
of Moi, 442.
Ducks, scout birds of Imaikalani, 226.
Ehu is given Kona, 206.
Ehunuikaimalino, cedes Kona and Kohala to Umi, 228;

king of Kona, 228.
Eight-finned shark, 28.
Ekaha fern of large leaf, 390.

Ekoko, or akoko tree (Euphorbia lorifolia), 54.
Eleeleualani, kahili of Lonoikamakahiki, 270, 280.
Eleio, a very fast runner, 482.

accepts call to Kanikaniaula, 482.
arrives at Kaupo, and finds Kanikaniaula returned from Hawaii, 486.
at full speed with feather cape, jumps into the hot umu, 484.
declines recompense, 484.
in reply to king, gives cause of delay, 484.
Kakaalaneo, angry at long absence of, prepares to bake him on return, 484.
legend of, 482.
meets and chased by a spirit, Kaahualii, on three occasions, 482.
meets husband of the dead woman, 484;
promises and, at end of fourth day, restores her to life, 484.
on order of Kakaalaneo, is to bring Kanikaniaula in the nights of Kane, 484, 486.
return of, watched for and fire signal started, 484.
returns from Hana by way of Kaupo; meets Kanikaniaula, 482.
returns home wearing the feather cape, 484.
runner to King Kakaalaneo, 482.
seized and pulled out of umu with remnant of feather cape, 484.
sent to Hana for fish, would return before the king sat down, 482.
sister of, aids him, 482.
takes a feather cape for Kakaalaneo, 484.
wishes Kanikaniaula to be wife of Kakaalaneo, 484. [v]
Elekaukama, 284, 302.
Elements, disturbance of the, an alii recognition, 538.
Elepaio, a bird, changing at times to human form, 534.

bird messenger of Kalamaula, lizard king of Keawewai, 534.
calling as a bird, changes to human form, 534.
calls upon the fog, 534, 536.
(Chasiempis sandwichensis), a favorite agent in Hawaiian myths, 534.
greets Hoamakeikekula and companion and chants a wreath-twining mele, 534.
Professor Henshaw’s observation on the, 534.
relates finding Hoamakeikekula, 536.
Eleu, dead bodies were strewn below, 414.

the breaking up is at, 386, 416.
Emblems of the god of the year, 282, 288, 306.
Epochs (five) from time of Opuukahonua, 26.
Erythrina monosperma, 220.
Euphorbia lorifolia, 54.
Ewa, 24, 364;

calm sea of, 378;
great, of Laakona, 378.
fish knows man’s presence, 342.
Kikenui of, 342.
Ewa’s net, drawing of, 396.
Fabulous fish-hook of Maui, 204.
Fairy story recognition of rank by the elements, 168.
Famine great in time of Hua, 136.

through drought, Waipio had food, 136.
Feather cape, a present for Kakaalaneo, 484.

an insignia of high chief rank, 484.
and club, tokens left by Nihooleki, 496.
Eleio returns home wearing the, 484.
from Hawaii brought by Kanikaniaula, 484.
rare at this time, 484.
Feather cloak, Ku arrayed in his, 384.

Kualii kills the opposing king and taking his, returns, 430.
Kualii took part in battles and carried away the, 428;
questions the boy on seizure of a, 430.
left as a token of recognition, 596.
someone came out of the conflict bearing a, 428.
Feather cloaks, canoe load of, wagered by Hauna, 312.
Feather god of Hakau, 202.

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Brief Chapter Summary and Learning Objectives

9.2 Types of Unemployment (pages 290–293)

9.3 Explaining Unemployment (pages 293–295)

9.4 Measuring Inflation (pages 295–298)

9.7 Does Inflation Impose Costs on the Economy? (pages 302–306)

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Measuring the Unemployment Rate, the Labor Force Participation Rate,

B. Problems with Measuring the Unemployment Rate

C. Trends in Labor Force Participation

D. Unemployment Rates for Different Groups

E. How Long Are People Typically Unemployed?

F. The Establishment Survey: Another Measure of Employment

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H. Job Creation and Job Destruction over Time

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Types of Unemployment (pages 290–293)

A. Frictional Unemployment and Job Search

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Extra Solved Problem 9.2

Unemployment Reason for Unemployment

Source: U.S. Department of Labor, Bureau of Labor Statistics. www.bls.gov

Solving the Problem

Percentage of The Unemployed

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Explaining Unemployment (pages 293–295)

A. Government Policies and the Unemployment Rate

Extra Solved Problem 9.3

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Solving the Problem

Measuring Inflation (pages 295–298)

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A. The Consumer Price Index

B. Is the CPI Accurate?

C. The Producer Price Index

Extra Solved Problem 9.4

Solving the Problem

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Step 2: Determine the value of the market basket.

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Extra Solved Problem 9.5

Solving the Problem

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Copyright © 2019 Pearson Education, Inc.

Nominal Interest Rates versus Real Interest Rates (pages 301–302)

Extra Solved Problem 9.6

1981 1984 1985 2014 2015 2016

Solving the Problem