1.Gross Domestic
Product
Explain the difference between nominal GDP and real GDP.
2.Unemployment Name and explain the three types of unemployment.
3.Inflation
Name and explain the two types of inflation.
Use the following information to answer the questions:
Total Population: 500
Population under 16 years of age or institutionalized: 120
Not in labor force: 150
Unemployed: 23
Part-time workers looking for full time jobs: 10
a)What is the size of the labor force?
b)What is the official unemployment rate?
1. Gross Domestic Product (GDP):
a) Nominal GDP is the total value of goods and services produced within a country's borders in a given period, measured in current prices. It does not take into account changes in price levels over time.
b) Real GDP is the total value of goods and services produced within a country's borders in a given period, adjusted for changes in price levels to account for inflation or deflation. Real GDP provides a more accurate measure of economic growth by removing the effects of inflation.
2. Unemployment:
a) The three types of unemployment are:
i) Frictional unemployment occurs when individuals are temporarily between jobs or just entering the labor market. It is usually voluntary, as individuals are taking time to search for better job opportunities.
ii) Structural unemployment arises due to a lack of demand for a specific type of labor. It occurs when technological advancements, changes in the industry, or shifts in consumer preferences render certain job skills obsolete.
iii) Cyclical unemployment is associated with fluctuations in the business cycle. It occurs during economic downturns when overall demand for goods and services decreases, leading to layoffs and job losses.
3. Inflation:
a) The two types of inflation are:
i) Demand-pull inflation occurs when there is excessive demand for goods and services, leading to price increases. It can be caused by factors such as increased consumer spending, government stimulus measures, or expansionary monetary policies.
ii) Cost-push inflation happens when the cost of production inputs, such as labor or raw materials, increases, leading to businesses raising prices to maintain profit margins. Factors contributing to cost-push inflation include higher wages, increased commodity prices, or supply chain disruptions.
Using the provided information to answer the questions:
a) The size of the labor force can be calculated by subtracting the population under 16 years of age, institutionalized population, and the number of individuals not in the labor force from the total population.
Labor force = Total Population - (Population under 16 years + Institutionalized population + Not in labor force)
= 500 - (120 + 150 + 150)
= 80
b) The official unemployment rate can be calculated by dividing the number of unemployed individuals by the labor force and multiplying by 100.
Unemployment rate = (Unemployed / Labor Force) * 100
= (23 / 80) * 100
= 28.75%