Chapter 7: Q.7.4 (page 142)
Evaluate who loses and who gains from inflation and distinguish between nominal and real interest rates
Long term bond investors, retired people, credit card holders etc lose and stockholders and investors gain from inflation.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Even after adjusting for price-level differences, because state income tax rates vary considerably across U.S. states, why might an income-threshold definition of who is "rich" yield very different results across states if it were to be based on after-tax incomes instead of before-tax incomes?
In a country with a labour force of 200, a different group of 10 people becomes unemployed each month but becomes employed once again a month later. No others outside these groups are unemployed.
a. What is this country's unemployment rate?
b. What is the average duration of unemployment?
c. Suppose that establishment of a system of unemployment compensation increases to two months the interval that it takes each group of job losers to become employed each month. Nevertheless, a different group of 10 people still becomes unemployed each month. Now, what is the average duration of unemployment?
d. Following the change discussed in part (c), what is the country's unemployment rate?
Suppose that a nation has a labour force of 100 people. In January, Amy, Barbara, Carine, and Denise are unemployed. In February, those four find jobs, but Evan, Francesco, George, and Horatio become unemployed. Suppose further that every month, the previous four who were unemployed find jobs and four different people become unemployed. Throughout the year, however, three people-Ito, Jack, and Kelleycontinually remain unemployed because firms facing government regulations view them as too costly to employ.
a. What is this nation's frictional unemployment rate?
b. What is its structural unemployment rate?
c. What is its unemployment rate?
Currently, the price index used to calculate the inflation rate is equal to 90. The general expectation throughout the economy is that next year its value will be 99. The current nominal interest rate is 12 per cent. What is the real interest rate?
Suppose you are given the following information:
a. What is the total population?
b. How many people are unemployed, and what is the unemployment rate?
c. What is the labour force participation rate?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
