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Economics Tutorial Questions: Unemployment and Inflation, Exercises of Economics

University of BotswanaEconomics

Tutorial questions for students in the Economics 112: Basic Macroeconomics course, covering topics on unemployment and inflation. The questions include definitions, analyses, calculations, and discussions on various aspects of these economic concepts. Students are expected to explain concepts such as full employment, unemployment, labor force, and inflation, as well as analyze their causes and effects.

Typology: Exercises

2021/2022

Uploaded on 01/28/2022

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DEPARTMENT OF ECONOMICS
ECO 112 BASIC MACROECONOMICS
TUTORIAL QUESTIONS
Topic 2.0 UNEMPLOYMENT
1. Explain the following
a) Full employment
b) Unemployment
c) Full employment unemployment rate
d) Underemployment
e) Disguised unemployment
2. Analyse the general causes of unemployment.
3. Discuss the following
a) Frictional unemployment
b) Structural unemployment
c) Cyclical unemployment
4. What is meant by labour force in the country? How is it defined in
Botswana?
5. How is the rate of unemployment measured in a country?
6. Observe the following hypothetical data for a country
Total population of the country 1.85 million
Children (below 16 year) 0.75 million
Not in labour force 0.22 million
Unemployed 0.15 million
Employed 0.75 million
a) Calculate the size of the labour force in the country
b) Calculate unemployment rate
7. Why is unemployment a serious problem? What are the economic and
non-economic costs of unemployment?
8. What is meant by GDP gap? What are its consequences?
9. What is Okun’s Law? How does it explain the economic cost of
unemployment?
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DEPARTMENT OF ECONOMICS

ECO 112 BASIC MACROECONOMICS

TUTORIAL QUESTIONS

Topic 2.0 UNEMPLOYMENT

  1. Explain the following

a) Full employment b) Unemployment c) Full employment unemployment rate d) Underemployment e) Disguised unemployment

  1. Analyse the general causes of unemployment.
    1. Discuss the following

a) Frictional unemployment b) Structural unemployment c) Cyclical unemployment

  1. What is meant by labour force in the country? How is it defined in Botswana?
  2. How is the rate of unemployment measured in a country?
  3. Observe the following hypothetical data for a country

Total population of the country 1.85 million Children (below 16 year) 0.75 million Not in labour force 0.22 million Unemployed 0.15 million Employed 0.75 million

a) Calculate the size of the labour force in the country b) Calculate unemployment rate

  1. Why is unemployment a serious problem? What are the economic and non-economic costs of unemployment?
  2. What is meant by GDP gap? What are its consequences?
  3. What is Okun’s Law? How does it explain the economic cost of unemployment?
  1. Discuss the problem of unemployment in the context of Botswana. What are the major causes and how do you think that it can be solved?

Topic 2.1 INFLATION

  1. What is meant by inflation?
  2. Analyse the causes of inflation in an economy
  3. How do we measure inflation?
  4. Explain the demand pull inflation and its causes
  5. What is cost push inflation or supply inflation? Explain the potential sources of cost push inflation
  6. How does inflation affect the real income of people of a country? If nominal income of people increased by 7.5 percent and the price level in the economy increased by 10 percent in 2013 in Botswana how does this situation affect real income of the people?

7. In 2008 some private schools refused to accept school fees paid in

Zimbabwean dollars, instead preferring to be paid in commodities,

such as petrol, maize, etc. Why would people/businesses refuse to

accept money in payment for goods and services?

  1. Explain the redistributed effects of unanticipated inflation in an economy
  2. How will each of the following individuals be affected by the unanticipated inflation

a) A pensioned BPC worker b) An employee in BTC c) A farmer in Maun heavily indebted d) A retired business executive whose current income comes from interest on Botswana government bonds e) The owner of OK Foods who sells groceries f) Land-lords receiving fixed amount of rent g) Real estate dealers, those purchased houses with fixed interest rates h) Persons living on flexible income i) Savers and debtors

10 Discuss the major causes of inflation in Botswana. What suggestions can you offer to control inflation in Botswana?

  1. Explain the role and functions of government/public sector in an economy
  2. What is meant by budget?
  3. Explain the following

i) Balanced budget ii) Budget deficit iii) Budget surplus iv) Development budget

  1. Distinguish between development expenditure and recurrent expenditure
  2. Discuss the causes for the growth of public expenditure. Why is there a need to control the growth of public expenditure in an economy?
  3. Discuss the sources of government revenue to finance its expenditure
  4. What is meant by tax? Why do the governments tax people?
  5. Distinguish between the benefits-received principle and the ability to pay principle of taxation.
  6. What are direct taxes and indirect taxes? Explain the advantages and disadvantages of direct taxes and indirect taxes
  7. What is meant by tax incidence?
  8. Discuss how the burden of a tax is shared by the seller and consumer when the demand for the taxed product/service is elastic or inelastic.
  9. What is meant by a progressive tax, a regressive tax and a proportional tax?
  10. Comment on the progressivity or regressivity of each of the following taxes indicating in each case where you think the tax incidence lies: a) Personal income tax b) Corporate income tax c) Road tax d) 12% VAT e) Excise tax on automobile tyres
  11. Suppose a tax is such that an individual with an annual income of P10, 000 pays P2000 of tax, a person with an annual income of P15, 000 pay P 3000 of tax, a person with income of P30, 000 pays P6000 of tax and so forth. What is each person’s average tax rate? Is this tax regressive, proportional or progressive?
  12. What is fiscal policy? What are the objectives and instruments of fiscal policy?
  1. Make out the distinction between expansionary fiscal policy and contractionary fiscal policy. Under what circumstances the government uses both of them in a country like Botswana?