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    Tutorial 3: Section B Essay Questions

    Uploaded by

    KAREN WONG
    This document provides sample exam questions on macroeconomic concepts such as unemployment, inflation, and income. 1. It distinguishes between frictional and cyclical unemployment, as well as unemployed and discouraged workers. Frictional unemployment is caused by job changes, while cyclical unemployment is due to economic downturns. Unemployed workers actively look for jobs, while discouraged workers give up looking. 2. Two types of unemployed people are job losers, who were laid off, and job leavers, who quit their job to find another. 3. Natural unemployment is frictional and structural, while cyclical unemployment occurs during recessions due to lack of demand. The

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    Tutorial 3: Section B Essay Questions

    Uploaded by

    KAREN WONG
    112 views4 pages
    This document provides sample exam questions on macroeconomic concepts such as unemployment, inflation, and income. 1. It distinguishes between frictional and cyclical unemployment, as well as unemployed and discouraged workers. Frictional unemployment is caused by job changes, while cyclical unemployment is due to economic downturns. Unemployed workers actively look for jobs, while discouraged workers give up looking. 2. Two types of unemployed people are job losers, who were laid off, and job leavers, who quit their job to find another. 3. Natural unemployment is frictional and structural, while cyclical unemployment occurs during recessions due to lack of demand. The

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    economics

    Original Title

    Lecture 2, Tutorial 3

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    This document provides sample exam questions on macroeconomic concepts such as unemployment, inflation, and income. 1. It distinguishes between frictional and cyclical unemployment, as well as unemployed and discouraged workers. Frictional unemployment is caused by job changes, while cyclical unemployment is due to economic downturns. Unemployed workers actively look for jobs, while discouraged workers give up looking. 2. Two types of unemployed people are job losers, who were laid off, and job leavers, who quit their job to find another. 3. Natural unemployment is frictional and structural, while cyclical unemployment occurs during recessions due to lack of demand. The

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    112 views4 pages

    Tutorial 3: Section B Essay Questions

    Uploaded by

    KAREN WONG
    This document provides sample exam questions on macroeconomic concepts such as unemployment, inflation, and income. 1. It distinguishes between frictional and cyclical unemployment, as well as unemployed and discouraged workers. Frictional unemployment is caused by job changes, while cyclical unemployment is due to economic downturns. Unemployed workers actively look for jobs, while discouraged workers give up looking. 2. Two types of unemployed people are job losers, who were laid off, and job leavers, who quit their job to find another. 3. Natural unemployment is frictional and structural, while cyclical unemployment occurs during recessions due to lack of demand. The

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 4

    Tutorial 3: Section B ~ Essay Questions

    1. Distinguish the following terms:


    (i) Frictional and cyclical unemployment; (5 marks)

    Frictional unemployment Cyclical unemployment


    It is caused by the change in market It is due to insufficient aggregate
    conditions. demand during the recession.
    People can leave their jobs for other People are unemployed due to
    jobs that require the same skills. fluctuations in the business cycle.
    (transferable skills)
    Example: a worker from Coffee Bean Example: During the recessions, Casey
    quits his job and is waiting to get lost her jobs as the company wanted to
    hired by Starbucks, due to increased reduce the output when people are not
    demand in Starbucks. spending.

    (ii) Unemployed and discouraged worker. (4 marks)

    Unemployed worker Discouraged worker


    A person who actively looked A person gives up looking for a job.
    for a job but not yet got a job.
    Unemployed workers will be Discouraged workers will be
    included in the unemployment excluded from the unemployment
    rate. rate.
    2. Describe any TWO (2) groups of people who are considered as unemployed.(4 marks)

    Job Loser Job Leaver

    Job Loser was employed in the civilian Job Leaver was employed in the
    labor force, was either fired or laid off. civilian labor force, quite his or her
    job.

    For example: Mei Ling was laid off For example: Ali quit his part-time
    from The Gold Mine where she job to search full time for a job that
    worked, because a recession caused more closely matches his education.
    a decrease in demand for metals.

    3. Differentiate between “natural unemployment” and “cyclical unemployment”. (6


    marks)
    Natural unemployment
    The natural unemployment rate refers to when all unemployment is frictional and
    structural. When there is no cyclical unemployment, it is also shown to be generated by
    normal frictions and structural changes. Therefore, the natural unemployment rate will
    also only be a positive percentage. Natural unemployment is the sum of the frictional
    unemployment rate and the structural unemployment rate. The natural unemployment
    rate would not be 0%.

    Cyclical unemployment
    Unemployment is due to a lack of aggregate demand and occurs during recessions or
    business cycle slowdowns. When people don't consume, companies will have to reduce
    production and lay off some workers. So, this will result in fewer jobs will be available.
    Cyclical unemployment will then rise. Cyclical unemployment is difference between the
    unemployment rate and the natural unemployment.
    4. Distinguish between nominal income and real income. (5 marks)

    Nominal income Real income


    Nominal income is referring to the Real income is the adjusted for price
    current prices amount of a person’s changes of a person’s nominal income.
    income.
    For example, the salary and profits. It also refers to the purchasing power of
    nominal income.
    Nominal income measures income at During inflation, the real income or the
    current prices with no adjustment for the purchasing power will falls.
    effect of inflation.
    Real income = Nominal income/CPI x 100

    5. Using the numerical example, explain the concept of “cyclical unemployment”. (5


    marks)
    Cyclical unemployment is when availability of workers is more than the availability job
    vacancies. It will occur due to economic recessions.

    For numerical example:


    Given unemployment rate (U) = 7%
    natural unemployment (UN) = 3%
    calculate the cyclical unemployment (UC)

    Cyclical Unemployment (UC) = Unemployment Rate (U) – Natural Unemployment (UN)


    UC = 7% - 3%
    = 4%
    6. The market basket used to calculate the consumer price index (CPI) in country Cancer
    is 4 loaves of bread, 6 gallons of milk, 2 shirts and 2 pants. In year 2018, bread cost
    RM1 per loaf, milk cost RM1.50 per gallon, shirts cost RM6 each and pants cost RM10
    per pair. In year 2019, bread cost RM1.50 per loaf, milk cost RM2 per gallon, shirts cost
    RM7 each and pants cost RM12 per pair.
    Assume the year 2018 is base year, what was country Cancer’s CPI in year 2019?
    (5 marks)

    Market basket Current-year Current-year Base-year prices Base-year


    prices in expenditures in 2018 expenditures
    (1) 2019 in 2019 (per item) in 2018
    (per item) (3) = (1) × (2) (4) (5) = (1) × (4)
    (2)
    4 loaves of RM 1.50 RM 6 RM 1 RM 4
    bread
    6 gallons of RM 2 RM 12 RM 1.50 RM 9
    milk
    2 shirts RM 7 RM 14 RM 6 RM 12
    2 pants RM 12 RM 24 RM 10 RM 20
      RM 56 RM 45

    Total RM expenditures on market basket in current year = RM 56

    Total RM expenditure on market basket in base-year = RM 45

    Consumer Price Index (CPI) = (Total RM expenditure on market basket in current year/ Total RM
    expenditure on market basket in base year) X100

    = RM (56/45) x 100

    = 124.44

    Country cancer’s CPI in year 2019 is 124.44

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