1. What is the difference between Frictional and Structural unemployment? Explain.
2. What kind of relationship exists between inflation and unemployment? Using Phillips Curve, explain the relationship between inflation and unemployment. Draw the graph and explain.
3. If initial new deposit is $50,000 and the reserve ratio is 20%, how much new deposits will be created in three rounds of deposit creation?
Rounds Deposit Change in Reserve Loan
First bank 50,000
Second bank
Third bank
4. If initial new deposit is $50,000, reserve ratio is 20% and currency drain ratio is 5%, what would be the money multiplier? How much new money will be created in the economy? Interpret the meaning of multiplier.