The consumer price index (CPI) in Econoland was 112.5 in 2014, 116.3 in 2015, an

Question

The consumer price index (CPI) in Econoland was 112.5 in 2014, 116.3 in 2015, and 118.1 in 2016.

a. Calculate the rate of inflation from 2014 to 2015, and from 2015 to 2016. Did the rate of inflation increase or decrease?

In June 2015, the size of Econoland’s labor force was 810 and the number employed was 695. In June 2016, the size of Econoland’s labor force was 790 and the number employed was 707.

b. Calculate Econoland’s unemployment rate in June 2015 and in June 2016.

c. Calculate the percent change in employment from June 2015 to June 2016.

d. Explain how a fall in the unemployment rate can be a sign of an unhealthy economy.


9. Draw a graph depicting the concept of the “business cycle”

Explanation / Answer

rate of inflation from 2014 to 2015=(116.3/112.5)-1=3.38% ,rate of inflation increased

rate of inflation from 2015 to 2016=(118.1/116.3)-1=1.55%, rate of inflation increase

overall , rate of inflation increased

b.

Econoland’s unemployment rate in June 2015=(810-695)/810=14.20%

Econoland’s unemployment rate in June 2016=(790-707)/790=10.51%

c.

percent change in employment from June 2015 to June 2016=707/695-1=1.73%

d.

a fall in unemployment rate reduces the income levels in the economy as people have no jobs which leads to decline in aggregate demand in the economy resulting in lower corporate profits which reduces investments, so overall consumtion and investment declines which is not good for economy.

we do only one question based on Chegg rule.

the above are the answers

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