ECON1002 T3

1. In each of the following situations, what type of unemployment is Melanie facing? a. After completing a complex programming project, Melanie is laid off. Her prospects for a new job requiring similar skills are good, and she has signed up with a programmer placement service. She has passed up offers for low-paying jobs.

• Frictional

• Structural

• Cyclical

1. In each of the following situations, what type of unemployment is Melanie facing? b. When Melanie and her co-workers refused to accept pay cuts, her employer outsourced their programming tasks to workers in another country. This phenomenon is occurring throughout the programming industry.

• Frictional

• Structural

• Cyclical

1. In each of the following situations, what type of unemployment is Melanie facing? c. Due to the current slump, Melanie has been laid off from her programming job. Her employer promises to rehire her when business picks up.

• Frictional

• Structural

• Cyclical

3a. Given the expected relationship between average inflation and menu costs, rank the countries in descending order of menu costs using average inflation over the period 2001–2013.

• Turkey, Brazil, Indonesia, United States, China, France, Japan

• Turkey, Indonesia, Brazil, United States, China, France, Japan

• Japan,France,China,United States, Brazil, Indonesia, Turkey

3b. Rank the countries in order of inflation rates that most favored borrowers with ten-year loans that were taken out in 2000. Assume that the loans were agreed upon with the expectation that the inflation rate for 2001 to 2013 would be the same as the inflation rate in 2000.

• Turkey, Indonesia, Brazil, United States, China, France, Japan.

• Indonesia, China, Japan, France, Brazil, United States, Turkey.

• Turkey, United States, Brazil, France, Japan, China, Indonesia

3c. Did borrowers who took out ten-year loans in Japan gain or lose overall versus lenders?

• gained

• lose

4a) Between 1980 and 1985, policy makers in the United Kingdom worked to lower the inflation rate. What would you predict happened to unemployment?

• increased

• decreased

4b) Policy makers react forcefully when the inflation rate rises above a target rate of 2%. Why would it be harmful if inflation rose from 3.4% to 5%?

5) After several quarters of a severe recession, explain why we might observe a decrease in the official unemployment rate.

5) Explain why we could see an increase in the official unemployment rate after several quarters of a strong expansion.