Question

1. Which of the following is a cost of unemployment? a. Unemployed individuals suffer a loss of income b.  Unemployed individuals are more likely to have emotional or psychological problems. c. Unemployed individuals can lose their job skills over time. d. Unemployment causes production to decrease from what it could be. e.  All of the above are costs of unemployment.

2. Which of the following is likely to be hurt by higher than expected inflation rates?

a. a retiree on a fixed income pension. b. a minimum wage worker with no marketable job skills or education. c. an unemployed single mother of five who is pregnant with twins. d. All of the above people are likely to be hurt by higher than expected inflation. e. None of the above people would be hurt by higher than expected inflation.

3. If my nominal wages go up 3% this year and inflation is 4% this year, what happened to my real wages? a. My real wages also went up by approximately 3% this year. b. My real wages went up by approximately 4% this year. c. My real wages went down by approximately 3% this year. d. My real wages went down by approximately 1% this year. e. My real wages stayed exactly the same as last year.

4.

27. Suppose you drink more tea because the price of coffee increased. Which of the following best explains this?

    a. the law of supply b. tea and coffee are complements c. tea and coffee are substitute d. the income effect e. All of the above

Answer 1

Answer)

1. Unemployment has many costs,not only individuals lose their income but they also face stress owing to no work,no income and inability to fulfill needs,over time their job skills become rusty as they are out of touch of workplace tools,more unemployment also leads to problems for economy as people have less income,less purchasing power leading to less consumption and thereby less production,hence all mentioned costs there are associated with unemployment,so correct option is option e.) All of the above are costs of unemployment
2. In this case we have to note higher than expected inflation rates all sections of society where income is not too high,in this case all three concerned people have no such luxury,they either have fixed pension,minimum wage or unemployment and higher than expected inflation rates will hurt all of them,their may be difference in level of difficulty they will face as retiree still have fixed income to cope with it but in terms of which will be hurt,our answer would be all three of them which is reflected in option d.) All of the above people are likely to be hurt by higher than expected inflation rates
3. Nominal here implies in absolute terms that is normal wages go up by 3%,but when we talk about real wages we are looking at relative wages that is we take into account inflation and to have same basket of food as last year,how much I have to shell out this year compared to last year,in this case nominal inflation has gone up by 4%,but nominal wages by only 3%,so we have to pay more than last year for same basket,which means real wage has gone down approximately by difference between two that is 1% which gives us our answer as option d.) My real wages has gone down by 1% this year
4. In this case,increase in price of coffee has shifted person more towards tea,this means person is not differentiating much between tea and coffee and substituting tea for coffee,please note in case of complements,price increase in one will decrease demand of both complements as both are related,but in this case tea 's demand is increasing which tells us they both are substitutes which is reflected in option.c tea and coffee are substitutes.

Answer is complete.Thank you!