Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 28, Problem 5.1P
To determine
Tradeoff between inflation and
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Inflation is defined as increases in the average prices in the economy. The February 2022 inflation rate is 7.9% which is the highest in the last 40 years. Have you noticed the price increases in your daily life? What goods are increased by the most? and by how much? What do you think are the causes of the recent inflation? How do you cope with the inflation?
Why is there no long-run trade-off between unemployment and inflation?
What is the current unemployment rate in the United States as of January 2021? What was the unemployment rate in the United States in January 2020? How has the pandemic affected the unemployment rate from January 2020 to the present?
Chapter 28 Solutions
Principles of Economics (12th Edition)
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- Suppose the number of employed people in Pakistan is 20.5 million. The unemployment rate in this economy is 8.8 percent, and the labor force participation rate is 65 percent. What is the size of the labor force and working-age population? How many people are unemployed? Explain and analyze different government policies which affect the unemployment rate in Pakistan? ( Maximum 200 words). Before June 2020, the labor market in Pakistan was at equilibrium with an equilibrium wage (WE) of Rs. 15,000 and equilibrium quantity of labor (LE) 10 million. In the last week of June, 2020, government of Pakistan imposed a minimum wage Act raising the minimum wage to Rs. 20,000. Using a graph, explain the effect of imposition of minimum wage on unemployment in labor market of Pakistan .arrow_forwardSince the United States has an unemployment compensation program that provides income for those out of work, why should we worry about unemployment?arrow_forwardFor a number of reasons, economists believe that the natural rate of unemployment in the U.S. economy declined from the 1980s to the 1990s and early 2000s. Provide at least two different reasons for this phenomenon and discuss each.arrow_forward
- Why a negative inflation (i.e., deflation) is worse than inflation?arrow_forwardMark Lai, a student of agricultural science in the developing country Mikatra, notes that the demand for rice increased substantially over the last ten years. He attributes this to the substantial growth in population during this period. Although rice cultivation in Mikatra is still labor-intensive, Mark observes that the inflation-adjusted wages for farm workers in the rice industry have more or less remained constant during this period, even though the supply of rice increased. This was contrary to Mark's expectations as inflation in Mikatra during this period was not very high. Which of the following, if true, is most likely to explain this outcome? A.Rice and other cereals form a smaller proportion of the food budget of higher-income individuals. B.The government of another major rice-producing country, Langun, subsidizes its rice farmers to keep its prices competitive in the global market. C.The government of Mikatra has recently set a price floor in the wheat market. D.Following…arrow_forwardConsider two hypothetical countries. In Country A, 18 percent of the labour force is unemployed for half the year and employed for the other half; the remaining 82 percent of the labour force is never unemployed. In Country B, 100 percent of the labour force is unemployed for 9 percent of the year and employed for the other 91 percent of the year. Note that both countries have an overall unemployment rate of 9 percent. Which of these countries seems to have the more serious unemployment problem, and why? O A. Country A because unemployment is unevenly distributed there. B. Country A because the unemployment is most likely cyclical. O C. Country B because unemployment is unevenly distributed there. O D. Country B because people are unemployed for the longer period of time. E. The answer is ambiguous. Both countries have very unevenly distributed unemployment.arrow_forward
- Consider two hypothetical countries. In Country A, 18 percent of the labour force is unemployed for half the year and employed for the other half; the remaining 82 percent of the labour force is never unemployed. In Country B, 100 percent of the labour force is unemployed for 9 percent of the year and employed for the other 91 percent of the year. Note that both countries have an overall unemployment rate of 9 percent. Which of these countries seems to have the more serious unemployment problem, and why? O A. Country A because unemployment is unevenly distributed there. O B. Country A because the unemployment is most likely cyclical. OC. Country B because unemployment is unevenly distributed there. O D. Country B because people are unemployed for the longer period of time. O E. The answer is ambiguous. Both countries have very unevenly distributed unemployment.arrow_forwardWhat is the current U.S. unemployment rate? Why has it changed over the last years or so?arrow_forwardDiscuss the short-run tradeoff between inflation and unemployment.arrow_forward
- When the actual unemployment rate is likely to fall below the natural rate of unemployment, we can expect thatarrow_forwardTrue or false? If unemployed workers become so frustrated from being unable to find new full-time jobs so they stop looking for jobs then the unemployment rate will droparrow_forwardSuppose a country surveys households and finds that 135 million people can be classified as being employed and 7 million people can be classified as being unemployed. The unemployed are people who do not have jobs but are actively looking for work. Given this information, what do we know about the unemployment rate for this country? The unemployment rate for this country is %. (Round your response to two decimal places.) Suppose this country has a natural rate of unemployment equal to 4.43%. What do we know about the size of the output gap, Y - Yn, in this country? The output gap in this country is million units. (Round your response to two decimal places and use a negative sign if necessary.) Now suppose this country has an a = 0.75 (). What do we know about the change in iflation, a - T( – 1), In this country between the previous year and this year? The change in inflation is percent. (Round your response to two decimal places and use a negative sign if necessary.)arrow_forward
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