Chapter 9 The Business CycleHomework Questions
Questions for homework
1. First, calculate two annual rates of inflation for a basket of goods which
increased in price from $600 to $630 and then to $693 over two years.
Second,
calculate the inflation rate over two years. Why was the inflationary rate over
two years exactly .5% higher than the sum of the rate
changes for each year?
2. Calculate the total unemployment cost incurred by a 5 trillion dollar
economy of 250 million people during the 199092 recession and
subsequent slow
recovery. Assume the unemployment rate was up an average of 1.5% each year for
the threeyear period. What was
the total cost to a family of four?
3. Contrast costpush and demandpull inflation.
4. Who is helped and hurt by inflation? Give examples from your own experiences.
5. Define and give examples of the three types of unemployment.
6. Draw and label a graph depicting the business cycle.
7. Inflate the 1980 GDP to 1990 prices. Calculate the percent increase in Real GDP using the new data.
1980 Nominal Data  1990 Nominal Data  
Q  P  T 
Q 
P 
T 

Shirts 
1 
10.00 
10.00 
2 
20.00 
40.00 
Movies 
2 
3 
6 
3 
5 
15.00 
GDP 
16.00 
55.00 
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