Chapter 14: Unemployment and Inflation
Main Idea: Unemployment and inflation are two of the biggest concerns of economists today.
Main Idea: Unemployment and inflation are two of the biggest concerns of economists today.
Focus Questions:
1. Why is the unemployment rate sometimes not an accurate measure of unemployment in the economy?
Answer: The fifth episode of The Economic Lowdown podcast series, “Unemployment,” covers the basics of unemployment: how it is defined, measured, and categorized. A “game show” quiz winds up the 9-minute lesson: www.stlouisfed.org/education_resources/economic-lowdown-podcast-series/unemployment
2. Why does the unemployment rate rise during contractions? Why does it often remain high even after the contraction is over?
Answer: “The Cost of Unemployment to the Economy”: www.investopedia.com/financial-edge/0811/The-Cost-Of-Unemployment-To-The-Economy.aspx
· According to the article, who bears the cost of widespread unemployment and how? Individuals who lose their jobs tap their financial resources, such as retirement accounts and savings. Society sees an increase in the crime rate as people on the margins look to supplement their meager incomes. The economy as a whole experiences the cost of forgone production. Businesses are required to increase their contributions to fund the unemployment insurance program, making them less likely to hire because they now lack the financial capacity to do so.
Answer: “Cost of Federal Unemployment Benefits So Far”: http://money.cnn.com/2011/12/05/news/economy/unemployment_benefits_extension/index.htm
· How might the extension of unemployment benefits affect the incentive for unemployed workers to find a job? The extension of benefits creates a perverse incentive for some unemployed workers to continue their job search thus lengthening the time period people remain unemployed, which in turn increases the unemployment rate.
3. What are the costs to the economy inflation? Who are the winners and losers from unexpected inflation?
Answer: The fourth episode of The Economic Lowdown, “Inflation,” discusses three aspects of inflation: what it is, what causes it, and how it is measured. The episode also addresses deflation, disinflation, and the role of the Federal Reserve in monitoring inflation: www.stlouisfed.org/education_resources/economic-lowdown-podcast-series/inflation
4. How does inflation in the past create inflation in the future?
Answer: Most North Americans have never experienced hyperinflation. To get an idea of what hyperinflation looks like, type “Zimbabwe inflation” into Google’s image search engine and display the images. Many of the pictures will show everyday consumer items, such as eggs or tomatoes, selling for billions, if not trillions, of Zimbabwean dollars.
Other Online Resources:
1. Why is the unemployment rate sometimes not an accurate measure of unemployment in the economy?
Answer: The fifth episode of The Economic Lowdown podcast series, “Unemployment,” covers the basics of unemployment: how it is defined, measured, and categorized. A “game show” quiz winds up the 9-minute lesson: www.stlouisfed.org/education_resources/economic-lowdown-podcast-series/unemployment
2. Why does the unemployment rate rise during contractions? Why does it often remain high even after the contraction is over?
Answer: “The Cost of Unemployment to the Economy”: www.investopedia.com/financial-edge/0811/The-Cost-Of-Unemployment-To-The-Economy.aspx
· According to the article, who bears the cost of widespread unemployment and how? Individuals who lose their jobs tap their financial resources, such as retirement accounts and savings. Society sees an increase in the crime rate as people on the margins look to supplement their meager incomes. The economy as a whole experiences the cost of forgone production. Businesses are required to increase their contributions to fund the unemployment insurance program, making them less likely to hire because they now lack the financial capacity to do so.
Answer: “Cost of Federal Unemployment Benefits So Far”: http://money.cnn.com/2011/12/05/news/economy/unemployment_benefits_extension/index.htm
· How might the extension of unemployment benefits affect the incentive for unemployed workers to find a job? The extension of benefits creates a perverse incentive for some unemployed workers to continue their job search thus lengthening the time period people remain unemployed, which in turn increases the unemployment rate.
3. What are the costs to the economy inflation? Who are the winners and losers from unexpected inflation?
Answer: The fourth episode of The Economic Lowdown, “Inflation,” discusses three aspects of inflation: what it is, what causes it, and how it is measured. The episode also addresses deflation, disinflation, and the role of the Federal Reserve in monitoring inflation: www.stlouisfed.org/education_resources/economic-lowdown-podcast-series/inflation
4. How does inflation in the past create inflation in the future?
Answer: Most North Americans have never experienced hyperinflation. To get an idea of what hyperinflation looks like, type “Zimbabwe inflation” into Google’s image search engine and display the images. Many of the pictures will show everyday consumer items, such as eggs or tomatoes, selling for billions, if not trillions, of Zimbabwean dollars.
Other Online Resources:
- In the CPI Word Cloud lesson, students compare the price of goods from one time period to another and interpret the effects of inflation on consumers. They get to categorize goods and services according to the eight major groups of the CPI and are able to determine the difference between the CPI and core CPI: www.stlouisfed.org/education_resources/market-basket