SN ST Rl 65 Q1. Drag and Drop. (20 points) 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 : in the economy. Demand-pull inflation is caused by a I:l shift in the aggregate demand curve, while cost-push inflation is caused by a |:| shift of the aggregate supply curve. When the price level is increasing by an extremely high rate, the economy is said to be experiencing |:| . Stagflation occurs when the economy is experiencing high inflation, high unemployment, and Iow|:| at the same time. To combat inflation, the government can use contractionary monetary policy which will also lead to I:l interest rates. Note, however, that there is a short-run tradeoff between inflation and':| as illustrated by the Philips Curve. Inflation is stable when the unemployment rate is equal to the |:| rate of unemployment. If the CPl in year one is 112 and in year 2 it is 118, we can say that consumer prices rose by about \\:' . 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 @ courses.yorkvilleu.ca . 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 I:I . 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 byl:l. 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 I:I 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 I:I unemployed. But, if finding another job takes so long so that the individual stops looking, then he/she is classified as a :I worker and is no longer counted in the unemployment statistics. An economy''s natural rate of unemployment is the sum of its frictional and |:| 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 . The increase in unemployment that occurs during recessions (or downturns) in the economy is known as the type of unemployment. @ courses.yorkvilleu.ca 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 unemployment. If the government reduces the number of weeks an unemployed worker can collect unemployment insurance payments, then it is likely that 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 I:I decrease in gross domestic product (GDP). @& courses.yorkvilleu.ca