Unemployment and Inflation
1. Nominal GDP was $14,830,400 in 2008, $14,418,700 in 2009, and $14,783,800 in 2010. The Price Index was 99, 100, 101 in 2008, 2009, and 2010, respectively.
a) In which year did the nation produce the most goods and services?
b) In which year did the nation produce the least goods and services?
c) In which year did a recession occur?
2. Explain how real incomes may increase during periods of inflation
3. If many workers become discouraged from looking for jobs, explain how the number of jobs could decline but the unemployment rate could fall at the same time.
4. A country with a population of eight million adults has five million employed, 500,000 unemployed, and the rest of the adult population is out of the labor force. What’s the unemployment rate? What share of population is in the labor force?
5. If inflation rises unexpectedly by 5%, indicate for each of the following whether the economic actor is helped, hurt, or unaffected:
a) A union member with a COLA wage contract
b) Someone with a large stash of cash in a safe deposit box
c) A bank lending money at a fixed rate of interest
d) A person who is not due to receive a pay raise for another 11 months