Question

1. What is the difference between Structural unemployment and Frictional Unemployment
2. What is the difference between fiscal policy and monetary policy?
3. List the three components of M1
4. What is Open Market Operation

Answer 1

ANSWER1-

STRUCTURAL UNEMPLOYMENT- Due to a rapidly thriving population, a fall in the rate of capital formation, technology change, etc, in the economy are called structural changes. So the unemployment caused by structural changes is called structural unemployment.

FRICTIONAL UNEMPLOYMENT- To the shift from one job to another job in search of better salary and employment conditions. So, while switching from one job to another there is an interim period when a person is unemployed is called frictional unemployment.

ANSWER2-

FISCAL POLICY-

1. Fiscal policy can be specified as controlling demand and supply of money by varying interest rates.
2. Fiscal policy is set up by the government.
3. It has no specific target.

MONETARY POLICY-

1. It is defined as the impact of government spending and taxes on the amount on demand.
2. Monetary policy is set up by the Central Bank.
3. It targets inflation.

ANSWER3-

Three components of M1 are -

1. Currency in circulation.
2. Checkable deposits
3. Currency

ANSWER4-

Open Market Operation-It refers to the buying and selling of securities, bills, and bonds of government and financial institutions by the Central bank. Through this buying leads to an increase in money supply and visa versa.