Q1. Drag and Drop.

Instructions. Fill in the blanks by dragging and dropping the missing words in the blanks. There are more word options available than blanks, so some might not be used. You can use one item only once. Click the submit button when all blanks are filled in.

Inflation measures the changes in the level of blank in the economy. Demand-pull inflation is caused by a blank shift in the aggregate demand curve, while cost-push inflation is caused by a blank shift of the aggregate supply curve. When the price level is increasing by an extremely high rate, the economy is said to be experiencing blank . Stagflation occurs when the economy is experiencing high inflation, high unemployment, and lowblank at the same time. To combat inflation, the government can use contractionary monetary policy which will also lead to blank interest rates. Note, however, that there is a short-run tradeoff between inflation andblank as illustrated by the Philips Curve. Inflation is stable when the unemployment rate is equal to the blank rate of unemployment.

If the CPI in year one is 112 and in year 2 it is 118, we can say that consumer prices rose by about blank . During the inflationary period if a worker received a 3% pay raise when the inflation rate was 7%, it means that the worker's real wage fell by blank . Similarly for the economy, if the price level rose by 4% and the nominal output rose by 9%, then the economy's real output has risen by blank . If the price of housing (which accounts for 40% of total expenditures in the CPI basket) also rose by 4% while the prices of all the other goods in the CPI basket remained constant, then the CPI would have risen by blank .

Unemployment occurs when a worker who is not currently employed is unable to find suitable paid employment. In every economy, however, there will always be people moving between jobs. This group is known as the blank unemployed. But, if finding another job takes so long so that the individual stops looking, then he/she is classified as a blank worker and is no longer counted in the unemployment statistics. An economy's natural rate of unemployment is the sum of its frictional and blank employment. If the labor market become more efficient so that people looking for work find matching jobs quicker, then the natural rate of unemployment will blank . The increase in unemployment that occurs during recessions (or downturns) in the economy is known as the blank type of unemployment.

The government utilizes fiscal policies to stimulate aggregate demand and reduce this type of unemployment. When the government subsidizes programs to train workers in new skills because of changes in technology, it is trying to reduce the amount of blank unemployment. If the government reduces the number of weeks an unemployed worker can collect unemployment insurance payments, then it is likely that blank unemployment numbers would decrease. There is a relationship between a nation's unemployment rate and its production which is represented by Okun's Law. The law predicts that that for every 1% increase in unemployment there will be a blank decrease in gross domestic product (GDP).

structural

hyperinflation

frictionally

production

discouraged

natural

higher

4%

2%

leftward

frictional

1.6%

unemployment

5%

rightward

cyclical

decrease

prices