Labor Economics
7th Edition
ISBN: 9780078021886
Author: George J Borjas
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 2, Problem 11P
A worker plans to retire at the age of 65, at which time he will start collecting his retirement benefits. Then there is a sudden change in the forecast of inflation when the worker is 63 years old. In particular, inflation is now predicted to be higher than it had been expected so that the average price level of market goods and wages is now expected to be higher. What effect does this announcement have on the person’s preferred retirement age:
- (a) if retirement benefits are fully adjusted for inflation?
- (b) if retirement benefits are not fully adjusted for inflation?
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a)Suppose you earn a 3% wage increase from your employer. Then, the government releases economic data indicating the inflation rate is running at 5%. Are you better off? Based upon changes in your real wages, did your standards of living improve ? b) suppose you took out 20,000 in student loans at a fixed interest rate of 5%. Assume that after you graduate, inflation rises significantly as you are paying back your loans. Does this rise in inflation benefits you in paying back your student loans? Who hurt more from unexpected higher inflation, a borrower or a lender?
c) in January 1980 the CPI stood at 77.8. By January 2006 the CPI was 198.3. By what percent have consumer prices increased over this period? Assume college graduates entering the job market in 1980 were being paid on average $1200 per month. Assume college graduates entering the job market in 2006 were being paid on average $3000 per month. Are the newer graduates paid more or less in real terms?
Your bank charges him an interest rate of 4% over the next year. If the real interest rate at
the beginning of the loan contract is 3%, then which of the given rate of expected
inflation over the upcoming year would be the most beneficial to you as the lender?
An inflation rate
OA) below 0%
B) greater than 3%.
OC) between 0% and 3%.
D) equal to 1%.
Suppose you have $150,000 in a bank term account. You earn 5% interest per annum from this account.
You anticipate that the inflation rate will be 3% during the year. However, the actual inflation rate for the year is 6%.
Calculate the impact of inflation on the bank term deposit you have.
ii. Examine the effects of inflation in your city of residence with attention to food and accommodation expenses.
iii. The Australian Bureau of Statistics (ABS) reported in May 2016 that the civilian population in Australia over 15 years of age was 19.8 million.
Of this population of 19.8 million Australians, 12.5 million were employed and 0.7 million were unemployed.
Calculate Australia’s labor force and the number of people in the civilian population who were not in the labor force?
Chapter 2 Solutions
Labor Economics
Ch. 2 - Prob. 1RQCh. 2 - Prob. 2RQCh. 2 - Prob. 3RQCh. 2 - Prob. 4RQCh. 2 - Prob. 5RQCh. 2 - Prob. 6RQCh. 2 - Prob. 7RQCh. 2 - Prob. 8RQCh. 2 - Prob. 9RQCh. 2 - Prob. 10RQ
Ch. 2 - Prob. 11RQCh. 2 - Prob. 12RQCh. 2 - Prob. 13RQCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - A worker plans to retire at the age of 65, at...Ch. 2 - Prob. 12PCh. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15P
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