Frictional Unemployment Is

question 5

Multiple Choice

Frictional unemployment is

• A)not inevitable;rather,it can be reduced to zero by well-designed public policies.
• B)not inevitable;rather,it could be reduced to zero if by the elimination of unemployment insurance.
• C)inevitable,because at any given time,jobs are being created in some firms and destroyed in other firms.
• D)inevitable,because in some industries,wages are always set above the level that brings supply and demand into equilibrium.

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Definitions:

Premium Bond

Bond prices and interest rates are inversely related; that is, they tend to move in the opposite direction from each other. A fixed-rate bond will sell at par when its coupon interest rate is equal to the going rate of interest, rd. When the going rate of interest is above the coupon rate, a fixed rate bond will sell at a “discount” below its par value. If current interest rates are below the coupon rate, a fixed rate bond will sell at a “premium” above its par value.

Floating Rate Bond

A floating rate bond is a bond with a variable interest rate, which adjusts periodically according to a specified benchmark.

Variable Rate

An interest rate that can change over the period of a loan or mortgage, based on an underlying benchmark interest rate or index.

Coupon Payment

The interest payment made to bondholders, typically semiannually, as a return on investment.