1)

a) There are two measures of economic growth (1) an increase in the real GDP occurring over
some time, and (2) an increase in real GDP per capita occurring over some time period.
b) Growth is needed to lessen the burden of scarcity on an economy. A growing economy can
consume more to day while producing more for the future. Economic growth enables a nation
to attain its economic goals more readily and to undertake new endeavors that require the use
of goods and services to be accomplished.
c) There are two main sources of growth (1) by increasing its inputs of resources and (2) by
increasing the productivity of those inputs.
d) The “rule of 70” is a mathematical approximation that provides a quantitative grasp of the effect
of economic growth. With this rule you can find the number of years it will take for some
measure to double, given its annual percentage increases. The dividing that percentage increase
into the number 70 (approximate number of years to double real GDP = 70/annual percentage
rate of growth).
2)
a) Gross domestic product (GDP) is basically how much money taken by the country from within
itself. GDP per capita is the GDP divided by the population. A good estimate of how much each
person makes - a larger population with a fairly large GDP might appear to be better off, but a
lower GDP per capita indicates that it is not as good as a smaller country with higher GDP per
capita. Real GDP on a per capita basis generally rises slower than real GDP whenever population
is growing. A growing population also means that periods of little or no growth are more severe
than they appear when measured in terms of real GDP.

b) Looking at United States and Japan I can see that the average annual growth rates of real GDP
have been more rapid in the U.S. The averaging 3.3 percent in the 1997-2005 periods
(4.457+4.355+4.826+4.139+1.08+1.814+2.49+3.573+3.054/9=3.3 average % real GDP of U.S.).
On the other hand Japan’s growth has been significantly slow especially in the first year it had a
significant drop. There 3 significant drops a total of 3 years which mad it negative during that
period. Afterwards the growth of Japan almost doubled the real GDP of United States.
(reference from: http://www.indexmundi.com/united_states/gdp_real_growth_rate.html )
c) The extent of the growth rates will understate the economic wellbeing of the economy. This is
because the real GDP and the real GDP per capita figures will not show understanding toward
improvements in product quality. Another factor is the increase in pollution and the possibility
of increase in stress caused by growth of the economy is left out in the measuring of these
figures. Lastly the figures do not take in account the increase in leisure since 1950.
3)
a) There are three groups the BLS divides the population into. (1)One is the population who are
under 16 years of age and people who are institutionalized, (2) Not in the Labor force, (3) Labor
force. The Labor force is the only one counted to be actually working.
b) The full-employment unemployment rate; the unemployment rate occurring when there is no
cyclical unemployment and the economy is achieving its potential output; the unemployment
 rate at which actual inflation equals expected inflation. There are three types of unemployment:
Frictional Unemployment, Structural Unemployment, and Cyclical Unemployment.
I. Frictional unemployment is the type of unemployment caused by workers looking for
their first job, voluntarily changing jobs, and by temporary layoffs. It is unemployed
workers between jobs. Frictional unemployment is "good" unemployment because
without it the economy could not be producing as much as possible (i.e. achieving the
potential level of output).
II. Structural unemployment is unemployment of workers whose skills are not demanded
by employers. They are unemployed because they lack sufficient skill to obtain
employment, or they cannot easily move to locations where jobs are available.
III. Cyclical unemployment is a type of unemployment caused by insufficient total spending
(or by insufficient aggregate demand). It is unemployment caused by the recession
phase of the business cycle. If there is less aggregate demand firms respond by
producing less. Output and employment are reduced. The extreme unemployment
during the Great Depression (25 percent in 1933) was cyclical unemployment.
c) The unemployment compensation program simply gives the unemployed enough funds for basic
needs and many of the unemployed do not qualify for benefits. The programs apply only to
those workers who were covered by the insurance, and this may be as few as one-third of those
without jobs. Unemployment is a total squander of resources so when the unemployed go back
to work, nothing is forgone except undesired leisure. In conclusion, unemployment can be
inflationary and costly to taxpayers.
4)
a) Fixed-income groups will be hurt by inflation because their real income suffers. Their nominal
income (the size of their paychecks) does not rise with prices, but if there is inflation the
purchasing power of their paycheck, or their real income, would decrease. Savers will be hurt by
unanticipated inflation, because interest rate returns may not cover the cost of inflation. Their
savings will lose purchasing power. Debtors (borrowers) can be helped and lenders hurt by
unanticipated inflation. Interest payments may be less than the inflation rate, so borrowers
receive “dear” money and are paying back “cheap” dollars that have less purchasing power for
the lender. Creditors (lenders) are hurt by unanticipated inflation since they will charge an
interest rate that is "too low" since they did not expect to be paid back with dollars that are less
valuable.
b) Unexpected deflation, a decline in price level, will have the opposite effect of unexpected
inflation. Many families are simultaneously helped and hurt by inflation because they are both
borrowers and earners and savers. Effects of inflation are arbitrary, regardless of society’s goals