Week 4 Homework

Chapter 6 2- How many recessions has the United States experienced since 1950? There have been 10 recessions in the United States since 1950. Which ones were the longest in duration? The longest was the 2007-2009 recession that lasted 18 months. The 1973-75 and 1981-82 are the second longest US recession which both lasted 16 months. Which ones were the most severe in terms of decline in real output? The 1973-75 was the most severe in terms of decline in real output at -4.9%. 3- Because the United States has an unemployment compensation program that provides income for those out of work, why should we worry about unemployment? The unemployment compensation program gives the unemployed enough funds for basic needs. Many of the unemployed do not qualify for unemployment benefits. The programs apply only to those workers who were covered by the insurance, and this may be as few as one-third of those without jobs. Unemployment could be costly to taxpayers: The unemployed are producing nothingtheir supply is zero but the compensation helps keep demand in the economy high. 4- What are the three types of unemployment? Unemployment is seen by some as undesirable. Are all three types of unemployment undesirable? Explain. Frictional Unemployment: Unemployment that is associated with people searching for jobs or waiting to take jobs in the near future. Frictional can be undesirable because those that fall into this category will more than likely have been fired from each job and is needing to move on to the next. Structural Unemployment: Unemployment that is associated with a mismatch between available jobs and the skills or locations of those unemployed. Structural can be undesirable because workers who find that their skills and experiences have become obsolete or unneeded thus find that they have not marketable talents Cyclical unemployment: Unemployment that is associated with the recessionary phase of a business cycle. Cyclical is undesirable because it begins to dig into the cost put out by the government and companies begin to be hit. 8- Explain how hyperinflation might lead to a severe decline in total output. As prices shoot up sharply and unevenly during hyperinflation, normal economic relationships are disrupted. Business owners dont know what to charge, consumers dont know what to pay. Money eventually becomes almost worthless and ceases to do its job as a medium exchange. The

economy may be thrown into a state of barter, and production and exchange drop. The results are economic, social, and possibly political chaos.