What is the inflation tax, and how might it explain the creation of inflation by a central bank?

Assignment 2 Questions: Chapter 15, 17 & 18 (10 Marks)

1.A country has 150,000 people. Of these 25,000 are children under the age of 16. 92000 people have jobs and 8000 don’t have job and are looking for work and 25,000 people are retired.

a.Calculate the labour force participation rate (2.5 Marks)

b.Calculate the unemployment rate (2.5 Marks)

2.What is the inflation tax, and how might it explain the creation of inflation by a central bank? (2.5 Marks)

3.Suppose a resident of Canada buys some machine tools from a company in Japan. Explain why and in what directions this changes Canada net exports and Canada net capital outflow. (2.5 Marks)