Question: Economics

Question: Economics

Question 1:     

There are three main types of unemployment that are frictional, structural, and cynical unemployment. These types are not explicitly observable and may also overlap, but they offer a valuable way of understanding unemployment. Frictional unemployment happens as workers switch job opportunities on the labor market and as individuals migrate into and out of the labor force. Worker mobility is essential for a competitive labor market which seeks to achieve effective labor distribution throughout the economy. This form of unemployment is generally of shorter. Frictional unemployment is expected to arise at all stages of the economic cycle and as with structural unemployment income and inflation are not impacted. Structural unemployment happens when the available jobs do not match with the people seeking employment. Workers may become unemployed if they work in businesses that decline in size or have skills that could be replaced as a consequence of technical advancements on a wide scale. They may consider it challenging to find jobs in another sector, and will decide to learn new skills or relocate to an area with more opportunities. Cynical unemployment happens when there are economic changes. A loss of competition for products and services during a financial crisis results in a scarcity of employment. A rise in cyclical unemployment may imply that the economy is functioning below its capacity. With more workers vying for employment, employers may provide smaller pay raises.

Question 2:

The first component is the Private Final Consumption Expenditure (PFCE). This component refers to the expenditure incurred by households and non-profit making institutions providing all types of consumer goods for households. These consumer goods include durable products, semi-durable goods, and non-durable goods and services. The second component is the Government Final Consumption Expenditure. This refers to the expenditure incurred by the government on various administrative functions.  In most cases, the government provides goods and services with an aim to benefit society rather than make profits. The third component is Gross Domestic Capital Formation. This component refers to the additional capital stock of the economy. It relates to the expenditure incurred on purchasing goods for investment by the production units within the domestic territory. The fourth component is net export. This refers to the difference between exports and imports within one year.

Question 3:

Average Propensity to Save (APS) is the proportion between saving and the conforming income. Average Propensity to Spend (APC) refers to the relationship between consumption expenditure to the conforming income. Marginal Propensity to Save (MPS) refers to the proportion of the difference in saving to the difference in the total income. GDP Multiplier is the ratio of change in income to a change in investment. The minimum value of the multipliers is one, and the maximum is infinity.

Question 4:

The first characteristic is general acceptability, which refers to the ability of a large group of people to recognize the value of money. Portability is the second characteristic. It refers to the ability to effectively transport money and still hold a high value. Third, we have durability. This refers to the ability to hold value for a long period of time. Fourth is homogeneity, which refers to the ability for material that makes money to be comparable. For instance, gold and silver have similar chemical and physical composition. The fifth is divisibility. This refers to the ability to change the value of money through division. The value of the money after being divided should be the same. Malleability is the sixth characteristic. The material used to make money can be shaped into different shapes and still hold value. Seventh, we have recognizability, which refers to the ability to be distinguished from other substances. Lastly, we have the stability of value. Money should hold value for as long as possible without fluctuating.

Question 5:

Total reserve refers to the total amount of money that the bank keeps in their vault and have deposited with the Federal Reserve Bank. Required reserve refers to the total amount of funds that banks hold in order to facilitate sudden withdrawals. Excess reserve refers to the excess amount of funds a bank holds in relation to the required minimum.