Use Your Economic Reasoning Bogeyman Economics By Bob Herbert The Post story sai

Question

Use Your Economic Reasoning Bogeyman Economics By Bob Herbert The Post story said: the unemployment rate up. Inflation is the bogeyman. No one has seen it in severa years, but the mere thought that at any moment it might spring back to life thei od help us, there's à "The surge in growth, which began last year...is strong chance the uneimploy ment rate will ultimatelyl below 5 percent. Can you imagine worse news? enough that it could soon drive the nation's jobless rate below 5 percent for the first time in nearly a quarter cen ncial markets' very own The abject fear that this has engendered was captured in tury, the analysts warned. the lead story in the Washing ton Past on Wednesday. You could almost hear the knees Freddy Krueger-is enough Warned. This news comes o keep the well-heeled on as a warning. It's as if thena constant edge tion were faced with the threat "Not only do we have of financial analysts kriocking ofa cure for cancer Be on the to stop infation when it as you read that the Federaalert: Prosperity for the jobless happens, but the Greenspan Reserve will probably have to is just around the corner We position is that we have to an- raise interest rates again next have no choice but to confront ticipate it and stop it before it month if this rampaging mon it, turn itaround, and chase it starts," said Robert Borosage, ster of an economy doesn't hurry up and slow down. out of the neighborhood alto-codirector of the Campaign gether. In short, we have to get for America's Future, apro- SOURCE: New York Times, April7,1997, p. A35. Copyright O 1997/96 by The New York Times Co. Reptinted by

Explanation / Answer

1. Low unemployment is also a cause of concern because it also means high unemployment.

Since there exists an inverse relationship between unemployment and inflation, low unemployment means high inflation, which is equally bad for the economy.

2. This is because inflation is not seen in the initial years, untill the time it becomes worse and starts to surface.

Also, it hides behind unemployment, which makes it necessary to keep a check on it before it becomes worse.

3. The consequence of this error is unaccounted unemployed population. By assuming a lower unemployment rate as natural rate, the difference between the two shows unaccounted population that is unemployed.

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.