1. What is hyperinflation? What causes hyperinflation?
2. Using the graph for labor market, show how moderate inflation can be a good thing?
3. Read the case study "Hyperinflation in Zimbabwe". Now explain briefly in your own words what caused the hyperinflation in Zimbabwe and how did they finally manage to get out of it.
4. Define natural rate of unemployment. Derive a relationship between natural rate of unemployment, job separation rate and job finding rate. What value of job finding rate would render a zero rate of unemployment?
5. If job separation rate goes up by 3% and job finding rate goes up by 2%, what happens to steady-state unemployment rate?
6. Some economists argue that minimum wage fails to target the appropriate working poor. Explain graphically how minimum wage is non-binding for middle-aged workers but binding for teenage workers. What alternative policy do the economists suggest?
7. Suppose there are only two sectors in the economy: manufacturing and services. 40% of the manufacturing employees are union members whereas the number is 15% for services. Which sector do you think has higher wage ratio (100x union wage/nonunion wage)? Why? Also explain which sector you think might have higher unemployment.
8. Read the case-study "The Increase in US Long-Term Unemployment and the Debate Over Unemployment Insurance". What are the two opposing views of Economists Robert Barro and Paul Krugman about the reason behind the unprecedented spike in the median duration of US unemployment during the recent financial crisis?
9. How would you describe returns to scale in the following production function, where R is natural resources, L is Labor and K is Capital? f(R, L,K)=ALA (1/2)KA (1/4)RA (1/4)
10. How would you describe returns to L and K separately in the following production function? f(L,K)=ALA(1/2)KA(1/4)
11. How would you describe returns to scale in the following production function, where L is Labor and K is Capital? f(L,K)=ALA(1/2)KA(1/4)