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Easy beginner econ question. Thank you!
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- a) If a country's natural unemployment rate is 5.5 percent and its actual unemployment rate is 3.5 percent, what is its cyclical unemployment rate? ___________percent Instructions: Enter the value for the output gap as an absolute number. b) According to Okun's law, this country would have (Click to select) a recessionary an expansionary output gap of _________percent.According to the Keynesian and New Keynesian theories; a. Show and explain the existence of involuntary unemployment in the labor market by using the Efficiency Wage Theory. b. Is the employment level that you found same with the full employment level indicated by the classical labor market theory? Why? Why not? c. According to the Keynesian theory, what would be the effect of the “A wave of investor and consumer pessimism about the future profitability of capital investments and lower future income” on output (Y), the real interest rate (r), employment (L) and the price level (P)? Distinguish between the short run and the long run effects by using the IS-LM-FE and AD-AS models and the effective labor demand theory.c. According to the Keynesian theory, what would be the effect of the “A wave of investor and consumer pessimism about the future profitability of capital investments and lower future income” on output (Y), the real interest rate (r), employment (L) and the price level (P)? Distinguish between the short run and the long run effects by using the IS-LM-FE and AD-AS models and the effective labor demand theory.
- Based on Okun's rule of thumb, if you forecast that the output gap will decline from -1% to -3%, the unemployment rate will: O rise by 0.5%. rise by 2%. O rise by 1%. fall by 1%.Consider an economy that experiences an outflow of working age people and a decline in aggregatelabour supply as a result. Suppose the aggregate labour demand curve is not affected by this change.(a) Explain, with the aid of the labour-market-equilibrium diagram, how this will affect the equilibriumreal wage and the full-employment level of employment. (b) Explain, with the aid of three separate IS-LM-FE diagrams, how this will affect real output, realinterest rate and the general price level in three steps:(i) before the general price level adjusts;(ii) when the general price level is adjusting;(iii) after the price adjustment process is completed.Is the general price level increasing or decreasing during the price adjustment process? Explain theintuition of your answer with reference to the AD-AS framework.True or False? Okun’s Law relates cyclical unemployment to short-run output. True False
- a) If a country's natural unemployment rate is 5.5 percent and its actual unemployment rate is 3.5 percent, what is its cyclical unemployment rate? ___________percent Instructions: Enter the value for the output gap as an absolute number. (PLEASE ANSWER THIS PART B) b) According to Okun's law, this country would have an expansionary output gap of _________percent.Consider another economy in which the unemployment rate over the next3 years is 6%, 7%, and then 4%. According to Okun’s law, what are thelevels of short-run output Y ~ in this economy?Let's assume that the working-age population of a specific country D is 210 million and 120 million people are in the labor force. If 114 million people are considered employed, and 6 million are considered unemployed, what is the rate of unemployment in percentage?
- Part B Consider an economy that experiences an outflow of working age people and a decline in aggregatelabour supply as a result. Suppose the aggregate labour demand curve is not affected by this change.(a) Explain, with the aid of the labour-market-equilibrium diagram, how this will affect the equilibriumreal wage and the full-employment level of employment. (b) Explain, with the aid of three separate IS-LM-FE diagrams, how this will affect real output, realinterest rate and the general price level in three steps:(i) before the general price level adjusts;(ii) when the general price level is adjusting;(iii) after the price adjustment process is completed.Is the general price level increasing or decreasing during the price adjustment process? Explain theintuition of your answer with reference to the AD-AS framework.a) Which of the following is not true? Frictional unemployment on the labor market arises from a lack of information in the labor market Cyclical unemployment exists because of a recession It is logically impossible for both the unemployment and the employment rates to both simultaneously increase or decrease together Structural unemployment exists because of mismatched worker skills and job availability Full employment requires that no cyclical unemployment exists on the labor market b) Suppose we have the following: (4th order) Value of trees $5 per tree and 1,000 tree harvested; (3rd order) 1,000 trees fabricated in to $25 wood pulp per ton (1,000 tons): (2nd order) 50,000 rolls of facial tissue ($10 each); (1st order consumer goods) of 30,000 boxes of Kleenex tissue at Safeway for $1 each. Which of the following it the correct calculation of GNP? $540,000 $400,000 $450,000 30,000 None of the above is correctConsider a one-period economy which experiences the destruction of some of the nation’s capital stock (say through a hurricane is de- stroyed). How should this effect equilibrium, consumption, output and labor supply? Now, let’s say the government tries to offset some of the declines in capital on output and hours worked by increasing govern- ment spending. What is the likely outcome of this policy intervention in terms of consumption? In our model, the affects of changes on wages are ambiguous because the income and substitution effects move in opposite directions. How do (many) macroeconomists deal with this ambiguity in terms of study- ing business cycle? How do economists resolve this ambiguity when studying long term economic development? Consider an economy with a straight line PPF. Show how an increase in government spending paid for by an increase in lump sum labor taxes affects outcomes. Do the same for an increase in government spending financed by a proportional income…
