Homework Set 10
Sherisse’ Woodley
C. Williams
Macroeconomics
23 July 2013
Homework Set 10
1. List the four categories of unemployment. * Fictional * Structural * Cyclical * Seasonal
2. What measurement tool constructed by the Bureau of Labor Statistics is used to measure changes in the level of prices of goods and services?
Consumer Price Index (CPI)
3. Who would benefit from unanticipated inflation –lenders or borrowers? Why? Who would benefits from anticipated inflation –lenders, borrowers, or neither? Why?
Lenders will benefit from unanticipated inflation because they can rise interest and make more money. Bowers will benefit from anticipated inflation because they had time to plan.
4. If there were 1.5 million unemployed persons in Canada with 15.5 million employed and a population of 20 million, what would the unemployment rate equal? What would the labor force participation rate equal?
8.82%
85%
5. In 2000, a price index for medical care in the United States increased from 254 to 265. Based on these figures, compute the rate of inflation or percentage increase in prices for this industry. How does this price change compare to that across the economy that year?
6. If the nominal interest on my mortgage is 3.0 percent and the expected rate of inflation for next year is 0.5 percent, what real interest rate will my mortgage lender earn?
2.5%
7. Holding everything else constant, if the government were to decrease welfare, unemployment, and Social Security disability payments, how would this action change the labor force participation rate? How would it change the unemployment rate? What would be the immediate impact of this action on the level of income inequality? In the short term, would this action likely cause an increase or decrease in the urban crime rate?
The labor force rate should increase. However, if there are not jobs/employment to replace the loss of benefits the rate will not increase. Unemployment
C. Williams
Macroeconomics
23 July 2013
Homework Set 10
1. List the four categories of unemployment. * Fictional * Structural * Cyclical * Seasonal
2. What measurement tool constructed by the Bureau of Labor Statistics is used to measure changes in the level of prices of goods and services?
Consumer Price Index (CPI)
3. Who would benefit from unanticipated inflation –lenders or borrowers? Why? Who would benefits from anticipated inflation –lenders, borrowers, or neither? Why?
Lenders will benefit from unanticipated inflation because they can rise interest and make more money. Bowers will benefit from anticipated inflation because they had time to plan.
4. If there were 1.5 million unemployed persons in Canada with 15.5 million employed and a population of 20 million, what would the unemployment rate equal? What would the labor force participation rate equal?
8.82%
85%
5. In 2000, a price index for medical care in the United States increased from 254 to 265. Based on these figures, compute the rate of inflation or percentage increase in prices for this industry. How does this price change compare to that across the economy that year?
6. If the nominal interest on my mortgage is 3.0 percent and the expected rate of inflation for next year is 0.5 percent, what real interest rate will my mortgage lender earn?
2.5%
7. Holding everything else constant, if the government were to decrease welfare, unemployment, and Social Security disability payments, how would this action change the labor force participation rate? How would it change the unemployment rate? What would be the immediate impact of this action on the level of income inequality? In the short term, would this action likely cause an increase or decrease in the urban crime rate?
The labor force rate should increase. However, if there are not jobs/employment to replace the loss of benefits the rate will not increase. Unemployment