1. Describe the three common indices used to measure inflation and the focus of each one.

2. Who loses from unanticipated inflation? Who benefits?

3. Describe the possible losses to our society and the economy when people are unemployed.

4. What is required for a person to be considered unemployed? How is the unemployment rate computed?

5. Why do teenagers and young people have high unemployment rates?

6. Describe the three types of unemployment. What types of government programs would be most effective in combating each type of unemployment?

7. You have several student loans that have interest rates that change every year. After graduation, you can consolidate these loans into a fixed-rate single loan. You can consolidate now or one year from now. How do your expectations of the inflation rate during the next year affect your decision regarding when to consolidate?

8. Suppose you work hard at a job after graduation and after your first year, your effort is rewarded with a 3% raise when the average wage increase in your company is 2%. Then, the government releases its inflation report which states inflation is running at 5%. Given this information, did your standard of living improve? Why or why not?

9. Since 1987, the U.S. population has grown 32%, while employment has increased by 39%. Further, the number of people unemployed has risen by 3%. Are all of these indicators a sign of a strong or weak labor market over the past two decades?

10. Assume you just lost your job and have decided to take a month-long break to travel to Europe before looking for a new position. Just as you return home from your trip, you are interviewed by the Department of Labor about your employment status. How would you be classified (employed, unemployed, or not in the labor force)? Explain why.

11. The Bureau of Labor Statistics categorizes unemployed people into several groups, including job leavers, job losers, and discouraged workers. During a mild recession, which group would tend to increase the most? During a deep recession? During a boom?

12. In the beginning of a recovery after a recession, employment begins to rise and the news media report these data on job growth. Would such a report have an impact on the labor force? Would it affect the unemployment rate?

13. A debate that regularly occurs in Congress concerns raising the debt ceiling, allowing the U.S. government to continue paying its obligations. A few years ago, one politician proposed that instead of raising the debt ceiling, the U.S. Treasury should just mint a trillion dollar coin and use it to “pay off” the federal deficit. If such a coin were to be minted, what would be its potential effects on inflation? Is this a risk-free way of paying off a fiscal deficit? Why or why not?

14. Federal unemployment benefits were extended in 2013, allowing unemployed workers to receive up to 73 weeks of benefits depending on the unemployment rate in each state. This is an extension of a program that at its peak during the last recession offered up to a maximum of 99 weeks of unemployment benefits. How does extending the federal unemployment benefit program influence the unemployment rate?

15. Suppose the country of Snowland uses the following market basket of goods to determine its consumer price index, with Year 1 being the base year with a CPI of 100. Nominal GDP is also provided.

16. The town of Villageton has 500 residents, of which 300 are employed, 30 are not working but actively seeking work, 80 are children in school, 40 are retirees, 30 are full-time college students, and 20 are institutionalized.

17. Using By the Numbers, describe the change in the average price of public college tuition and private college tuition relative to the overall change in prices based on CPI. Has a college education become more or less affordable in real terms?

18. By approximately what percentage did average housing prices increase from 2001 to the peak in 2006? By what percentage did average housing prices fall from the peak in 2006 to the bottom point in 2012?