f everything within a closed economy increased in price (goods and incomes for instance), it might appear that the relative positions of people in the closed economy would not be affected by inflation. In fact, however, those persons with the wider gaps between income and consumption would gain ground on persons with narrower gaps between income and consumption as a result of uniform inflation. In point of fact also, however, there are no longer any truly closed economies. Thus, open economies characterized by higher rates of inflation tend to experience a transfer of wealth to open economies characterized by lower rates of inflation. Additionally, whether in closed or open economies, rates of inflation almost never are uniform. Some sectors of the economy are hurt more than others in a typical inflationary situation. In fact bankers must be especially inept to lose money during an inflationary period.
When the United States experienced especially high rates of inflation in the last-half of the 1970s and in the early-1980s, the cost of American good increased to the point where exports suffered and unemployment increased. While businesses would be willing to borrow at high interest rates because they would gain by repaying loans in inflation-depreciated dollars, there was little incentive to take advantages of the situation because demand for their products was dampened by the inflation.
8th Question: 1. in the Requirements.
Structural unemployment is best studied from a long-term perspective because both changes in structural unemployment and the causes of structural unemployment take a long time to develop. Frictional unemployment and cyclical unemployment are best studied from a short-term perspective because such shifts in unemployment typically are dynamic in character. Dynamic changes tend to be short-term phenomena, which in turn cause such changes to be more amenable to study from a short-term perspective.
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