Macro Economics Chapters 6 & 7
Question #1
Cost-push inflation Increases in the price level resulting from an increase in resources costs and hence in the per unit production cost.
Demand-pull inflation Increases in the price level caused by an excess of total spending beyond the economy's capacity to produce. Question #2 Frictional unemployment is caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
Structural unemployment is a the unemployment of workers whose skills are not demanded by employers, who lack sufficient skills to obtain employment, or who cannot easily move to locations where jobs are available.
Cyclical unemployment is unemployment caused by a decline in total spending (or by insufficient aggregate demand).
Seasonal unemployment is caused by seasonal factors. IE; Kamiskotia snow resort workers. Question #3
Hyperinflation is a very rapid rise in the general price level. As prices shoot up, consumers anticipate the trend to continue and are unsure of what to pay, whereas business owners don't know what to charge. Resource supplies want to be paid with actual output, rather than with rapidly depreciating money. Because consumers are unsure of what to pay for products, the demand goes down, and as a result, output is halted. As there are fewer goods being produced, the need for workers to produce is lower, pushing the output and employment in an unfavourable direction. Question #4
Recession is a period of decline in total output, income and employment.
Trough is the point during a recession or depression when output and employment reach their lowest levels.
Expansion is the phase of the business cycle during which output and employment rise toward full employment.
Peak is a phase in the business cycle during which the economy is at full employment and the level of real output is at or very close to the economy’s capacity. NUMERICAL QUESTIONS
Question #1 Year 1
Year 5
Labour force
10,255,000
12,550,000
Unemployed Discouraged Workers
Employed

125,000
9,467,240

180,000
10,473,200
Unemployed
787760
2076800
Unemployment rate
7.7%
16.5% rounded

a) Both employment and unemployment can increase because of more people in the labour force to be counted towards the