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Macroeconomics Study Set 43

Business

Quiz 9 :

A: Business Cycles, Unemployment, and Inflation

Quiz 9 :

A: Business Cycles, Unemployment, and Inflation

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What phase of the business cycle is the Canadian and your provincial economy experiencing at the present time? Justify your answer.
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This question might best be given as a group assignment or as an exam question that students are notified of in advance.Direct your students to the current news media.In particular, The Globe and Mail and the National Post have frequent articles on the state of the economy.Even without reading any articles, students could surmise the phase by finding out the current inflation and unemployment rates and/or finding information on the latest report of "leading indicators," and comparing this information to similar statistics from the recent past.If possible, have students visit the Bank of Canada website (http://www.bankofcanada.ca/) and Statistics Canada's website (http://www.statcan.gc.ca/start-debut-eng.html).They may also have access to the CANSIM database through your library.

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How is the unemployment rate affected if employment increases from 9 million to 9.5 million and the labour force increases from 10 million to 11 million?
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Although employment has increased, the unemployment rate is higher since unemployment has increased by a greater proportion than the labour force.When 9 million were employed, the unemployment rate was 10% [(10 - 9)/10].When 9.5 million are employed, the unemployment is 13.6% [(11 - 9.5)/11].

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Explain the differences among the frictional, structural, cyclical, and seasonal forms of unemployment.
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Frictional unemployment is the unavoidable and even positive type of unemployment characterized by people who are searching for new jobs or their first job or waiting to take jobs in the near future.Structural unemployment is unemployment due to changes occurring over time in the structure of consumer demand or in technology which result in some skills being in less demand or even becoming obsolete.It may also be due to a change in the geographic distribution of job opportunities.Cyclical unemployment is the unemployment caused by the recession phase of the business cycle.Economists place special emphasis on this type of unemployment because they believe that economic policy can reduce cyclical fluctuations in the economy and therefore can reduce cyclical unemployment.Seasonal unemployment occurs because some industries (e.g., forestry, fishing, tourism, construction) effectively shut down for part of the year, often due to weather.

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Discuss the unequal burden of unemployment for different demographic groups in Canada.
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In the table below are statistics showing the labour force and total employment during year 1 and year 5.Make the computations necessary to complete the table. img (a) How is it possible that both employment and unemployment increased? (b) Would you say that year 5 was a year of full employment? (c) Why is the task of maintaining full employment over the years more than just a problem of finding jobs for those who happen to be unemployed at any given time? img
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What are the economic and non-economic costs of unemployment?
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"The economic cost of unemployment is measured by the GDP gap." Explain this statement.
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What is Okun's law? Give an example of how it works.
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"The increasing importance of durable goods has made our economy more vulnerable to cyclical fluctuations." Explain and evaluate.
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What are two criticisms of the unemployment rate? How do these criticisms relate to the overstating or understating of the unemployment rate?
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Use the following data to calculate: (a) the size of the labour force and (b) the official unemployment rate.Total population 1,500; population under age 15 and institutionalized, 360; not in labour force, 450; unemployed, 69; workers with part-time jobs who are looking for full-time jobs, 30.
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What is inflation and how is it measured?
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According to most economists, what is the immediate cause of the business cycle? Give an example of how this causes expansion and contraction in the business cycle.
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Calculate the rate of inflation between Year 1 and Year 2.The price index in Year 1 was 124.0.It was 130.7 in Year 2.
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If the population is 26.7 million, the labour force is 13.6 million, and the number measured as unemployed is 0.68 million, what is the rate of unemployment?
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Define the "full-employment" or "natural" rate of unemployment and give its approximate percentage rate as economists currently define it.
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What is meant by the term business cycle? List the four phases of the business cycle.
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Why might the unemployment rate increase when the economy moves into its recovery phase?
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In the table below are statistics showing the labour force and total employment in month 1 and month 2 of the same year.Make the computations necessary to complete the table. img
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Which types of industries are hit hardest by a recession? Explain.
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