Question 1

What are the two reasons why the rate of growth of output has to be at least equal to the normal growth rate of output (which is 3.75% using Australian data 1960- 2011) to prevent the unemployment rate from rising? Explain.

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Question 2

First, what do discouraged workers represent? Second, explain whether the existence of discouraged workers causes the official unemployment rate to provide an over- estimate or under- estimate of the extent to which labour resources are unemployed.

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Question 3

Explain the relation known as the Phillips curve.

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Question 4

Explain whether it is possible for nominal GDP to increase and real GDP to decrease in the same period.

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Question 5

Briefly explain why the reported official unemployment rate in Spain in 1994 may have provided an over- estimate of unemployment in Spain.

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Question 6

Explain why economists care about inflation.

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Question 7

Do the CPI and GDP deflator always move together? Explain.

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Quiz 2: A Tour of the Book