Which one of the following would be classified as employed?
Answer(s): D
A person who is not actively looking for a job is not a member of the labor force and therefore is not employed.An individual who is not a member of the formal market and works at home without wages is not a member of the formal labor force. An auto worker who is waiting to be re-hired or who was laid off is considered unemployed.
If unemployment was deemed too high by policy makers, which of the following policy tools might be utilized?
Answer(s): B
One method to reduce unemployment is to engage in expansionary fiscal policy. This requires the government to spend more than it collects in taxes. The result is a net increase in aggregate demand, which will increase the quantity supplied, and therefore reduce unemployment.
An increase in the expected future inflation rate will:
Answer(s): A
An increase in the expected future inflation rate will have two impacts. First, sellers will have reduced incentive to sell at current prices; they would rather store the current production for future sales at higher prices.Secondly, resource suppliers, to the extent that they anticipate the higher inflation, will increase the resource prices in their contracts. Both these factors will serve to reduce the quantity the producers will be ready to supply at any given price, moving the short run supply curve to the left. The long-run supply curve will not be affected since over that period, all adjustments to the expected future conditions will have been made, restoring the equilibrium.
Countries A and B have the same monetary base and reserve requirement. People in A tend to hold more currency than people in B. The money supply will be:
When people hold currency instead of bank deposits, the money goes out of circulation temporarily and the full impact of the deposit expansion multiplier is not felt. The higher this tendency to hold currency, the lower will be the money supply, even though the monetary base has not been affected.
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