Economics 4th Edition: Individual & Social Costs of Unemployment
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Questions and Answers

What happens to the value of money when there is an increase in the money supply?

  • It remains unchanged
  • It is inversely related to the price level
  • It increases
  • It decreases (correct)

    • What happens to the price level when there is an increase in the money supply?

  • It is directly related to money demand
  • It increases (correct)
  • It remains unchanged
  • It decreases

    • What does the quantity equation (MV=PY) relate the quantity of money (M) to?

  • Nominal value of output (P  Y) (correct)
  • Nominal interest rates
  • Real GDP
  • Unemployment rate

    • What does the velocity of money refer to?

    <p>The speed at which money changes hands</p> Signup and view all the answers

    What is one of the individual costs of unemployment mentioned in the text?

    <p>Increased risk of slipping into poverty</p> Signup and view all the answers

    How does unemployment impact economic activity according to the text?

    <p>Unemployment can impact on economic activity and create further unemployment</p> Signup and view all the answers

    What is one of the social costs of unemployment mentioned in the text?

    <p>Deteriorating health</p> Signup and view all the answers

    What is one effect of the reverse multiplier effect mentioned in the text?

    <p>Increase in demand for luxury goods</p> Signup and view all the answers

    What is one consequence of inflation according to the text?

    <p>Distorted consumer decisions</p> Signup and view all the answers

    How does inflation affect the tax burden on capital gains?

    <p>It increases the tax burden</p> Signup and view all the answers

    What is a consequence of central bank-induced inflation according to the text?

    <p>Erosion of the real value of the unit of account</p> Signup and view all the answers

    What is a unique cost of unexpected inflation highlighted in the text?

    <p>Arbitrary redistribution of wealth</p> Signup and view all the answers

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