Instructions The Mystery of Low Unemployment and Low Inflation: Background Information: The actual unemployment rate is lower than the estimated natural rate of ur happens we are in an "inflationary gap" and that wages and prices should rise. Natural Rate of Unemployment (Long-Term) Civilian Unemployment Rate 10 9 Inflationary Gap: The actual unemployment rate natural rate 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Even though the unemployment rate has fallen to lowest levels in 20 years the inflation rate has remaine Federal Reserve. Economists are searching for explanations. 1. What is surprising about today's low rate of inflation. 2. Why is the Fed concerned about such a low inflation rate? 3. How could technological progress lead to low inflation? 4. How could an aging population lead to low inflation? 5. How could globalization lead to low inflation? Percent 8

Instructions The Mystery of Low Unemployment and Low Inflation: Background Information: The actual unemployment rate is lower than the estimated natural rate of ur happens we are in an "inflationary gap" and that wages and prices should rise. Natural Rate of Unemployment (Long-Term) Civilian Unemployment Rate 10 9 Inflationary Gap: The actual unemployment rate natural rate 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Even though the unemployment rate has fallen to lowest levels in 20 years the inflation rate has remaine Federal Reserve. Economists are searching for explanations. 1. What is surprising about today's low rate of inflation. 2. Why is the Fed concerned about such a low inflation rate? 3. How could technological progress lead to low inflation? 4. How could an aging population lead to low inflation? 5. How could globalization lead to low inflation? Percent 8

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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8. Suppose that people expect inflation to be 3 percent but that, in fact, prices rise by 5 percent. Describe how this unexpectedly high inflation would help or hurt the following: a. the government b. a homeowner with a fixed-rate mortgage C. a union worker in the second of a labor year contract d. a college that has invested some of its endowment in government bonds
O Macmillan Learning Unemployment and Inflation - End of Chapter Problem How will the following changes affect the natural rate of unemployment? Frictional unemployment falls a. The government reduces the duration of unemployment benefits. incorrect Frictional unemployment rises b. More teenagers focus on their studies and do not look for jobs until after college. Structural unemployment falls d. Union membership declines Answer Bank Structural unemployment rises e. Greater access to the internet leads both potential employers and potential employees to use the internet to list and find jobs
Time Period nominal interest rate percent Expected Inflation (Percent) Actual Inflation (Percent) Expected Real Interest Rate Actual Real Interest Rate Before increase in MS 10 2 2 Immediately after increase in MS 10 2 5 Suppose the nominal interest rate on savings accounts is 10% per year, and both actual and expected inflation are equal to 2%. The unanticipated change in inflation arbitrarily harms ______________. Now consider the long-run impact of the change in money growth and inflation. According to the Fisher effect, as expectations adjust to the new, higher inflation rate, the nominal interest rate will ______________ to per year.
The CPI inflation rate from 1982 to 2002 is ________ and from 2002 to 2022 is ________. The difference in the rates of inflation is ________. A. 46.9 percent; 33.7 percent; -13.2 percentage points B. 46.9 percent; 33.7 percent; -28.1 percentage points C. 88.4 percent; 50.9 percent; -42.4 percentage points D. 88.4 percent; 50.9 percent; -37.5 percentage point
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Question 23 The term natural in the phrase natural unemployment rate implies that the unemployment rate is as low as it can be when it is at the natural rate. that unemployment is at an ideal rate when it is at the natural rate. the unemployment rate that prevails when real GDP equals potential GDP. that the unemployment rate is at the highest rate it can be when it is at the natural rate. that the unemployment rate is at the rate it would be at if there were no minimum wage laws.
Annual Rate of Inflation (%) 12 C3 C₂ C₁ 160 B4 B3 B₂ B₁ 567 8 9 Unemployment Rate (%) Refer to the above graph. The long-run relationship between the rate of inflation and the unemployment rate is represented by: A line connecting points B₁ and C₁ The zigzag line, B₁C₁B₂C₂B3C3B4 A line connecting points B₁B₂B3B4 A line connecting points C₁C₂C3
25) The amount by which potential GDP exceeds actual GDP is one meas (a) natural rate of unemployment. (b) aggregate cost of unemployment. (e) difference between real and nominal GDP. (d) difference between real and nominal income. anamnloyment rate
↑ Inflation Measure WPI Headline WPI Headline 1 WPI Food 0.34 WPI Core 0.82 CPI Headline 0.32 CPI Food 0.41 CPI Core -0.04 Inflation Measure WPI Headline WPI Food WPI Core CPI Headline CPI Food CPI Core WPI Headline 1 0.55 0.93 0.58" 0.34" 0.77" A: 1997 02-2008 04 WPI Food WPI Core CPI Headline CPI Food CPI Core 1 0.20 0.90 0.93 0.63 1 0.09 0.26 -0.32 B: 2009 01-2019 04 WPI Food WPI Core CPI Headline CPI Food CPI Core 1 0.27 0.91" 0.89 0.74* 1 0.39 0.10 0.67* Revisit Later 1 0.94 0.81 1 0.92* 0.86* 1 0.58 1 0.61* 1 1 Table 2: Correlation matrix of inflation measures (Please ignore the meaning of the * sign) Q. Based on Table 2, we can draw the conclusion that- Select an option & Clear Response The direction of movement between CPI core and WPI headline is not necessarily the same across the years Post 2008, WPI core and WPI headline have moved in opposite directions Prior to 2009, the correlation between WPI core and WPI headline has been very weak Post 2008, CPI core and WPI headline…
1. The inflation-unemployment relationship The following graph shows the combinations of unemployment and inflation that existed in the United States from 1961 through 1969. Hint: Use the graph to answer the following questions. Select any blue point (circle symbol) on the graph to get its exact coordinates. NFLATION RATE (Percent) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 3.0 O 1969 O 3.5 1968 O 1967 C 4.0 1965 O 5.0 1964 962 O 4.5 5.5 6.0 UNEMPLOYMENT RATE (Percent) 1963 6.5 1961 H 7.0 ++ Scratch Point A lower unemployment rate is associated with a lower inflation rate. O There is a trade-off between unemployment and inflation. O There is a positive relationship between unemployment and inflation. O The unemployment rate peaked at 3.5%. (?) Which of the following statements about the relationship between the unemployment and inflation data for 1961-1969 is true? The points on the graph represent observations along the U.S. economy's Phillips curve during the 1960s. Use the black…
Questions E,F,G