Help **Table 28-2**Suppose people in the adult population in a small country are classified based on their age.| Labor Force Status | Age ||---------------------|-------------------------|| | Less than 55 | 55 and Older || Number employed | 400,000 | 100,000 || Number unemployed | 25,000 | 7,000 || Number in population| 600,000 | 200,000 |**Refer to Table 28-2.** In the proper order, which age group has the highest unemployment rate and which has the highest labor-force participation rate?a. Under 55, under 55 b. 55 and older, 55 and older c. 55 and older, under 55 d. Under 55, 55 and older **Question:**If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is- a. 12 percent.- b. 2 percent.- c. 0.4 percent.- d. -2 percent.**Correct Answer:** b. 2 percent.**Explanation:**In finance, the relationship between nominal interest rates, real interest rates, and inflation is represented by the Fisher equation:\[ \text{Nominal Interest Rate} = \text{Real Interest Rate} + \text{Inflation Rate} \]Given:- Nominal Interest Rate = 5%- Real Interest Rate = 7%To find the inflation rate, rearrange the equation:\[ \text{Inflation Rate} = \text{Nominal Interest Rate} - \text{Real Interest Rate} \]Plug in the values:\[ \text{Inflation Rate} = 5\% - 7\% = -2\% \]However, the answer selected, b. 2 percent, should instead reflect a scenario where the real interest rate exceeds the nominal one. Revising this, the real interpretation of negative inflation should have shown as option d. The selection presented in the answer may need reconciling with the theoretical calculation.

Due to the Bartleby policy, we will solve only the first question. Labor force It is the number of…

Suppose people in the adult population in a small country are classified based on their age. Labor Force Status Age Less than 5555 and Older Number employed Number unemployed Number in population 600,000 400,000 100,000 25,000 7,000 200,000 Refer to Table 28-2. In the proper order, which age group has the highest unemployment rate and which has the highest labor-force participation ra: a. Under 55, under 55 b. 55 and older, 55 and older c. 55 and older, under 55 O d. Under 55, 55 and older

Suppose people in the adult population in a small country are classified based on their age. Labor Force Status Age Less than 5555 and Older Number employed Number unemployed Number in population 600,000 400,000 100,000 25,000 7,000 200,000 Refer to Table 28-2. In the proper order, which age group has the highest unemployment rate and which has the highest labor-force participation ra: a. Under 55, under 55 b. 55 and older, 55 and older c. 55 and older, under 55 O d. Under 55, 55 and older

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

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**Table 28-2**

Suppose people in the adult population in a small country are classified based on their age.

| Labor Force Status | Age |
|---------------------|-------------------------|
| | Less than 55 | 55 and Older |
| Number employed | 400,000 | 100,000 |
| Number unemployed | 25,000 | 7,000 |
| Number in population| 600,000 | 200,000 |

**Refer to Table 28-2.** In the proper order, which age group has the highest unemployment rate and which has the highest labor-force participation rate?

a. Under 55, under 55
b. 55 and older, 55 and older
c. 55 and older, under 55
d. Under 55, 55 and older

**Question:**

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is

- a. 12 percent.
- b. 2 percent.
- c. 0.4 percent.
- d. -2 percent.

**Correct Answer:** b. 2 percent.

**Explanation:**

In finance, the relationship between nominal interest rates, real interest rates, and inflation is represented by the Fisher equation:

\[ \text{Nominal Interest Rate} = \text{Real Interest Rate} + \text{Inflation Rate} \]

Given:
- Nominal Interest Rate = 5%
- Real Interest Rate = 7%

To find the inflation rate, rearrange the equation:

\[ \text{Inflation Rate} = \text{Nominal Interest Rate} - \text{Real Interest Rate} \]

Plug in the values:

\[ \text{Inflation Rate} = 5\% - 7\% = -2\% \]

However, the answer selected, b. 2 percent, should instead reflect a scenario where the real interest rate exceeds the nominal one. Revising this, the real interpretation of negative inflation should have shown as option d. The selection presented in the answer may need reconciling with the theoretical calculation.

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