ECON 240 Assignment 1 The full-employment rate is an arbitrary level of employment that takes into account frictional and structural unemployment. It is used to calculate equilibrium in the changing labor market. It is difficult to calculate the full-employment rate. Economists first find the natural rate of unemployment; in so many words means that those members of the labor force that really want a job have one. If there is an agreed natural unemployment rate of 5% and …showed first 75 words of 681 total…

…showed last 75 words of 681 total…of inflation. If you borrow money at 5%, and you anticipate an inflation rate of 5%, then your real rate of interest would be zero. If you knew that prices were going to go up, it would be advantageous to borrow money at a fixed interest rate. Therefore, if inflation occurs while you are paying back your money each month, you would be paying less back because of the tendency of money to depreciate when inflation occurs.