Problem 1) What is the difference between structural unemployment and cyclical unemployment?
a) What type of unemployment is best studied within the long-run framework? Why?
b) Does the unemployment rate underestimate or overestimate the unemployment problem? Explain.
c) If unemployment rises by 2 percentage points, what will likely happen to output in the United States?
Problem 2) Inflation, on average, makes people neither richer nor poorer. Therefore it has no cost. True or false? Explain.