Question

Q1)According to economists, the biggest “cost” of unemployment is

            a.         increased “welfare” expenditures.                           c.         the value of foregone output.

            b.         lost tax revenue.                                                       d.         none of these.

Q2)

Which of the following statements is LEAST correct?

            a.         Inflation is a period of time during which the value of money is rising.

            b.         Affluent people – with assets other than money – can and often do benefit from inflation.

            c.         Both World War II (during the early 1940s) and the Vietnam War (during the late 1960s)

generated what’s known as demand-pull inflation.

            d.         “The Energy Crisis” of the 1970s generated what’s known as cost-push inflation.

Q3) The type of unemployment that economists find most concerning is

            a.         frictional unemployment.                                           c.         structural unemployment.

            b.         cyclical unemployment.                                              d.         voluntary unemployment.

Answer 1

Q.1) Here, option (c ) may be treated as a more appropriate answer

Unemployment refers to such a situation where many who are employable find for jobs and end up in such a situation wherein the economic structure is mot able to provide jobs for them. This would mean that the opportunity in the economic structure is less so as to accommodate the productive population in the same. This would result in such a situation in the economy wherein much of the population who are willing to work and are highly productive are not brought in to the economic sphere which would result in loss of revenue for the economy between the current state and the state where they are being employed in the economy, Hence the ‘forgone output’ would be the biggest cost of unemployment in an economy.

Welfare expenditures are not a compulsory for an economy as far as the unemployed population are considered and hence does not contribute much to the social costs of the economy.

Although taxation is a good source of revenue for the economy, the income taxation would not be applicable to all those who are employed and hence it would not cause much loss to the economy.

Q.2) Here, option (a) is the correct answer

Inflation refers to such an economic situation wherein the price value of the commodities would rise owing to economic downfalls and thus this would lead to decline in the value of money as more money would be required to purchase the same amount of commodity in such situations.

It is a fact that inflation normally affects the poor sections of the society more than the affluent and wealthy sections of the society.

Demand-pull inflation refers to such a situation wherein the upward pressure in the prices are caused due to the demand for certain commodities in the economy following the shortage in the supply of goods. Both World War II and Vietnam war created such a phenomenon in the economy where many of the goods and resources were destroyed and the demand for such items were increased which resulted in a demand-pull inflation in the process.

Cost-push inflation refers to such a situation in the economy wherein the price rise is caused due to the rise in the production prices and the wage structure in the economy. The energy crisis of 1970’s created a huge shortage in the petroleum products and thus it created a fall in the supply which caused a rise in the production price which created a cost-push inflation in the economy.

Q.3) Here, option (c ) is the correct answer

Structural unemployment is the most serious kind of unemployment in an economy. It refers to such a situation where the individual is willing to do work but cannot find one due to unavailability of the same in the economy or the lack of skills to fit the kind of unemployment that is available in the economy. Hence, it would represent the seismic changes and the trends of an economy which is on a downfall and hence this is the serious form of unemployment.

Frictional unemployment refers to the unemployment phenomenon which represents the time gap between once an employee leaves a job and joins the other.

Cyclical unemployment refers to the unemployment resulting from the changes of economic cycles. It usually rises during recessionary periods and declines during economic expansions

Voluntary unemployment refers to such a case where the individual is not employed as he/she is not able to find a job that suits him/her. Thus, in such a case, the jobs are available, but the individual does not take them as it is not suited for him/her.