26.1 What
are the four phases of the business cycle? How long do business cycles
last? Why does the business cycle affect output and employment in
capital goods industries and consumer durable goods industries more
severely than in industries producing consumer nondurables?
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26.2 How, in general, can a financial crisis lead to a recession? How, in general, can a major new invention lead to an expansion?
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26.3 How
is the labor force defined and who measures it? How is the unemployment
rate calculated? Does an increase in the unemployment rate necessarily
mean a decline in the size of the labor force? Why is a positive
unemployment rate—one more than zero percent—fully compatible with full
employment?
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26.4 How,
in general, do unemployment rates vary by race and ethnicity, gender,
occupation, and education? Why does the average length of time people
are unemployed rise during a recession?
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26.5 Why
is it difficult to distinguish between frictional, structural, and
cyclical unemployment? Why is unemployment an economic problem? What are
the consequences of a negative GDP gap? What are the noneconomic
effects of unemployment?
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26.6 Because
the United States has an unemployment compensation program that
provides income for those out of work, why should we worry about
unemployment?
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26.7 What
is the Consumer Price Index (CPI) and how is it determined each month?
How does the Bureau of Labor Statistics calculate the rate of inflation
from one year to the next? What, effect does inflation have on the
purchasing power of a dollar? How does it explain differences between
nominal and real interest rates? How does deflation differ from
inflation?
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26.8 Distinguish
between demand-pull inflation and cost-push inflation. Which of the two
types is most likely to be associated with a negative GDP gap? Which
with a positive GDP gap, in which actual GDP exceeds potential GDP? What
is core inflation? Why is it calculated?
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26.9 Explain
how an increase in your nominal income and a decrease in your real
income might occur simultaneously. Who loses from inflation? Who gains?
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26.10 Explain how hyperinflation might lead to a severe decline in total output.
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26.11 LAST WORD
Suppose that stock prices were to fall by 10 percent in the stock
market. All else equal, would the lower stock prices be likely to cause a
recession? How might lower stock prices help predict a recession?
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