Question

5-Describe two of the following terms/concepts. (FOCUS ON ORIGINALITY) Seasonal unemployment Underemployment Unemployment benefits 6-Describe two of the following terms/concepts. (FOCUS ON ORIGINALITY) Inflation Hyperinflation Deflation 7-Describe two of the following terms/concepts. (FOCUS ON ORIGINALITY) Contractionary fiscal policy Discretionary fiscal policy Expansionary fiscal policy 8-Describe two of the following terms/concepts. (FOCUS ON ORIGINALITY) Federal Reserve System Money market mutual fund Reserves 9-Describe two of the following terms/concepts. (FOCUS ON ORIGINALITY) Balance sheet Federal funds rate Required reserves 10-Describe two of the following terms/concepts. (FOCUS ON ORIGINALITY) International Monetary Fund (IMF) Exchange rate Currency devaluation

Answer 1

5) Seasonal unemployment-When people are unemployed for some time of the year it is seasonal unemployment.This takes place in agriculture and industries because people are not needed all the year round. Eg tourism,farming etc.

underemployment-This takes place when employees are willing to work and at the same time able to work full time but they do not get job.Workers are not able to use all their skills and education.Visible and invisible are the two types of underemployment.Visible means workers are willing to work but they do not get work and invisible occurs when occurs who have full time job do not utilise their skill to the utmost level .Recession may lead to underemployment..Again cyclical unemployment also causes underemployment.They may also occur for technological changes.There is poverty as a result of underemployment.

6)Inflation occurs when there is a sustained increase in the prices of goods and services.The causes are demand pull and cost push inflation.When demand is more and supply is less price rises.Again a rise in cost of production causes prices to rise. Inflation is caused by increase in money supply. Inflation reduces purchasing power .Mild inflation is good because it encourages consumption.

Deflation-This means sustained decrease in price level.Supply may be more and there is less money in circulation to purchase the goods.It leads to recession and central bank try to control recession as soon as it starts.

7)Contractionary fiscal policy-During inflation the government increases tax and reduces government expenditure to decrease demand in the economy.

Expansionary fiscal policy-During recession the government reduces tax and increases expenditure which in turn increases demand in the economy.

8)Federal reserve system is the central bank of USA.It influences the supply of money and regulates and supervises the financial institutions. It is the fiscal and banking agent.

Money market- Financial instruments which have high liquidity and very short maturity period are traded in money market .Money market transactions do not involve individuals but take place between financial institutions and companies. The participants are banks who lend to large companies,investors who put money in banks for short term,companies that sell commercial papers in the market.

9)Federal fund rate is the interest rate at which banks lend to other banks overnight on uncollaterised basis ie without any additional security..

Balance sheet is the financial statement of a company which shows the assets and liabilities of the company.It also shows the equity of the share holders at a particular point of time.

10)IMF is international monetary fund . It is an international organisation.Its headquarter in in Washington DC.189 countries are members and they work for financial stability, promote international trade, reduce poverty and promote growth.

Exchange rate-It is the price of a unit of domestic currency expressed in terms of foreign currency.Thus it is the rate at which one currency is exchanged for another or we can say it shows the value of domestic currency in comparison to foreign currency..