Naufal Putra Nurshadiqin

041711333262

1. Between 2004 and 2007, total U.S. Employment increased by 6.8 million workers,
but the number of unemployed workers declined by only 1.1 million. How are these
numbers consistent with each other? Why might one expect a reduction in the
number of people counted as unemployed to be smaller than the increase in the
number of people employed?

The fact that employment increased 6.8 million while unemployment declined 1.1million
is consistent with growth in the labor force of 5.7 million workers. The laborforce
constantly increases as the population grows and as labor-force participationincreases, so
the increase in the number of people employed may always exceedthe reduction in the
number unemployed.

2. Consider an economy with two labor markets—one for manufacturing workers and
one for service workers. Suppose initially that neither is unionized. If
manufacturing workers formed a union, what impact on the wages and employment
in manufacturing would you predict? How would these changes in the
manufacturing labor market affect the supply of labor in the market for service
workers? What would happen to the equilibrium wage and employment in this
labor market?

- If a union was formed by the manufacturing workers, we can expect their wages to go
up and their employment to go down. Wages in unionized sectors are typically 10%
to 20% higher than non-unionized comparable sectors. The higher wages mean that
employers are going to demand less labor so that employment will likely decrease in
the manufacturing market.

- This decrease in demand for labor within the manufacturing market will increase the
supply of labor within this market will cause wages to decrease.
Naufal Putra Nurshadiqin
041711333262

3. In what sense is inflation like a tax? How does thinking about inflation as a tax help
explain hyperinflation?
Inflation is like a tax, as everyone who holds the money loses a part of purchasing power
when inflation occurs. When the government raises its revenue by printing new money, it
induces inflation into the market as the money supply increases in the market. Thus, it
creates hyperinflation.