Homework Set 10 Essay

982 WordsAug 11, 20134 Pages
Sherisse’ Woodley C. Williams Macroeconomics 23 July 2013 Homework Set 10 1. List the four categories of unemployment. * Fictional * Structural * Cyclical * Seasonal 2. What measurement tool constructed by the Bureau of Labor Statistics is used to measure changes in the level of prices of goods and services? Consumer Price Index (CPI) 3. Who would benefit from unanticipated inflation –lenders or borrowers? Why? Who would benefits from anticipated inflation –lenders, borrowers, or neither? Why? Lenders will benefit from unanticipated inflation because they can rise interest and make more money. Bowers will benefit from anticipated inflation because they had time to plan. 4. If there were 1.5…show more content…
Income equality will not change drastically at the onset. The individuals will still live in th same area and be receiving the same or less depending on the education level or their ability to acquire additional skill or trades. The increase in crime will go up at the onset because there will be individuals without employment and benefits to sustain their children and families. 8. Assume that at some point in your life, you will maintain several bank accounts including a checking account and a money market account. You might pay a fee of $100 each year for your bank to sweep funds to and from your checking account depending on the balances. At the same time, you might have a job that provides for an increase in your salary based on changes in the rate of inflation. In this situation, does a loss in purchasing power represent a cost of inflation? Why or why not? Do your banking fees represent a cost of inflation? Why or why not? 9. Assume that you loaned me $1,000 at a very generous nominal interest rate of 3 percent to be paid back in one year. There is a sudden upturn in the economy, however, and inflation increases to 5 percent next year. As a result, when I repay you the $1,000 plus your $30 interest, has your purchasing power increased or decreased as a result of this loan and the interest that you received? What would your real rate of return equal? Based on your answers to the previous two
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