FDNECON 01 · Macroeconomic Goals, Employment and Prices

Prices are increasing more slowly; the lower positive rate is disinflation, not deflation.

Inflation is the rate of increase in a price index. Both 7% and 3% are positive, so the index rises in both periods. A negative rate, rather than merely a lower positive rate, would indicate a declining overall price level.

10% unemployment; 66.67% participation.

The labor force is 9,000 + 1,000 = 10,000. Unemployment uses 1,000/10,000; participation uses 10,000/15,000. Dividing unemployed by total population or employed confuses the denominators.

Yes: it falls from 10% to about 8.16% because unemployment and participation both shrink.

After the exits, unemployed = 800 and labor force = 9,800. The new rate is 800/9,800 × 100 ≈ 8.16%. Employment did not increase, so the lower rate alone is insufficient evidence of improved hiring.

Structural unemployment from a skill mismatch.

The enduring mismatch between existing skills and available roles is structural. A recession-driven decline in sales would indicate cyclical unemployment, while a predictable recurring season would indicate seasonal unemployment.

Frictional unemployment from the time required for job matching.

The case describes normal matching time and gives no mismatch, downturn or seasonal contract. The cause of the unemployment, rather than the person’s age or graduation date, determines the category.

It includes frictional and structural unemployment, so zero cyclical unemployment need not mean zero total unemployment.

The source defines the natural rate through frictional and structural components. Full employment in this simplified framework does not eliminate ordinary matching time or structural adjustment.

6%.

The output gain is ₱75 billion. Divide by the earlier ₱1,250 billion: 75/1,250 × 100 = 6%. Dividing by the new value uses the wrong base; 106% is the new level relative to the old, not its growth rate.

CPI 115: the basket is 15% more expensive than in the base year.

CPI = 920/800 × 100 = 115. That compares today with the base year. Latest-year inflation requires the previous year’s CPI; it cannot be inferred without that comparison.

4%; the five index-point change is divided by the earlier index of 125.

(130 − 125)/125 × 100 = 4%. The difference is five points, but a percentage change scales that difference to the previous level. CPI minus 100 compares with the base year instead.

To isolate price changes rather than changes in what or how much is purchased.

Holding the basket fixed prevents a change in quantities or composition from being mistaken for a change in prices. The resulting average does not require all actual households or individual prices to behave identically.

Outside the labor force.

Participation requires employment or the conditions for unemployment. This student satisfies neither. The numerical exercises state the relevant population so age alone does not determine participation.

Employed, despite temporary absence from work.

The source explicitly includes people with a job who are temporarily absent. A snapshot of physical attendance is not sufficient to classify a job holder as unemployed.

Cyclical unemployment.

The triggering mechanism is the business-cycle decline in demand. Structural requires a lasting mismatch, and seasonal requires a predictable recurring season; neither is supplied.

Higher inflation, under the sketch’s other-things-equal assumptions.

The plotted relationship slopes down between inflation and unemployment. It is a simplified short-run relationship, so it should not be promoted to an unconditional promise about all real economies.

A contraction is a phase of falling activity; a trough is its low turning point before recovery.

Read the cycle chronologically: expansion reaches a peak, contraction moves activity downward, and the trough marks the low turning point. A phase and a turning point are different objects.

The chart shows an association; other factors and unequal outcomes can coexist with it.

The source charts motivate studying output and well-being. They do not isolate causality or show that national averages guarantee identical outcomes for every person.