Assignment: Effects of Unemployment and Inflation

The Discussion topics focus on how to measure the cost of living and rate of unemployment in the economy, and specific discussion areas include the various forms of unemployment and how they are measured, debates on measuring unemployment rate, and the imperfections of official unemployment rate. Moreover, consumer price index (CPI), rate of inflation, and their impacts on the cost of living will be discussed.

Respond to two of the following Discussion topics.

Topic 1: There are various forms of unemployment. There are also ongoing debates on the effectiveness of measuring the rate of unemployment and its policy implications.

a. What are the different types of unemployment and how are they related to the condition of the economy during a given period? Is it possible for the number of employed workers to increase while the unemployment rate rises? Explain

b. Does an Increase in the Minimum Wage Rate result in a Higher Unemployment Rate? What is your opinion on the relationship between unemployment benefits and labor market participation of the unemployed people?

Topic 2: The consumer price index (CPI) is used to calculate the rate of inflation, and hence it measures the cost of living in an economy.

a. How do we use consumer price index (CPI) to measure the cost of living? What is the relationship between CPI and the rate of inflation?

b. What is the importance of measuring price fluctuations? How does the change in average price help explain the difference between nominal and real interest rates?