Austin Leishman - Unemployment and Inflation.docx - ECON 2020—Macroeconomics Name Austin Leishman Assignment Designation Unemployment and Inflation 1

Austin Leishman - Unemployment and Inflation.docx - ECON...

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ECON 2020—Macroeconomics Name: Austin Leishman Assignment Designation: Unemployment and Inflation 1. What are the four phases of the business cycle? How long do business cycles last? How do seasonal variations and long-term trends complicate measurement of the business cycle? Why does the business cycle affect output and employment in capital goods and consumer durable goods industries more severely than in industries producing nondurables? a. The four phases of the business cycle are peak, recession, trough, and expansion, but the cycle length may vary depending on the type of economy and other factors and complications, especially when these shifts are unexpected. The business cycle affects output and employment in capital goods industries and durable goods industries with much greater impact because the quantity/quality of nondurables will continue to decrease, but not as much as capital goods and consumer durables.
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Unformatted text preview: 2. What is the Consumer Price Index (CPI) and how is it determined each month? How does the Bureau of Labor Statistics (BLS) calculate the rate of inflation from one year to the next? What effect does inflation have on the purchasing power of a dollar? How does it explain differences between nominal and real interest rates? How does deflation differ from inflation? a. The CPI is calculated by taking a market basket or sampling of goods that are typically being purchased by consumers. Prices for goods in the market basket are collected each month, weighted by the importance of the good in the basket. Different products cost much more than other products, but typically the larger purchases are not conducted as frequently. These large price differences are compensated for and averaged in order to form an accurate price level. Page 1 ECON 2020—Macroeconomics Page 2 ECON 2020—Macroeconomics Page 3...
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  • Spring '11
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