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- Starting from the natural rate of output and the natural rate of unemployment, show the short run and medium run effect of a decrease in government spending, assuming there's no change in productivity on AS-AD and PC graphsThe rate of output and planned expenditures for the economy of timbuktu are shown in the following table: Total Output(Real GDP in Billion dollars) Planned Aggregate Expenditures (Two-sector Economy) (in billions) 5,000 5,250 5,500 5,500 6,000 5,750 6,500 6,000 7,000 6,250 a. If the economy's full employment rate of output is 6.0 trillion, what will happen to the unemployment rate assuming that it will persist into future? b. What would happen to the equilibrium level of output/income if there will be an autonomous increase in investment of 250 billion?Many economists think that long-run economic growth is important for the welfare of a nation. Classify the statements below regarding long-run economic growth as true or false. No explanation is needed just whether or not is is true or false - An economy that has experienced long-run economic growth has avoided painful recessions - There has been more long-run economic growth in the last 100 years than occurred between the years 1000 and 1700 - Long-run economic growth is often a direct result of expansionary monetary policy - A nation with a shrinking population cannot experience long-run economic growth - Long-run economic growth can be measured with per capita GDP - Long-run economic growth is often a result of increases in productivity
- Why do we measure short-run output Y in percentage terms rather than in dollar terms? Explain in detail pleaseMacropoland, a country that is a natural gas and oil importer, has a natural rate of unemployment (at the full employment level of GDP) that is about 4.5%, and the long run average rate of inflation over time has been about 2%. However, during the period 1973-1974, the country experienced an inflation rate of about 15% while simultaneously experiencing unemployment of nearly 13%.At the present time, Macropoland is experiencing very sluggish consumption and investment (a result of a fall in the housing market), and unemployment has again edged up to around 9%. Inflation is very low at 0.4%.Macropoland has just hired you as their economic advisor. You have a big job ahead of you. Using your knowledge of aggregate demand and aggregate supply, can you explain what happened in these two time periods?Develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. Organize your response in a clear and logical…The rate of output and planned expenditures for the economy of Timbuktu are shown in the following table: Total Output Planned Aggregate Expenditures (Two-Sector Economy)(Real GDP in billion dollars) (in billions) 5,000 5,250 5,500 5,500 6,000 5,750 6,500 6,000 7,000…
- Suppose that output is produced according to the production function Y = Kα[(1 - u)L]1-α, whereK is capital, L is the labor force, and u is the natural rate of unemployment. The national savingrate is s, the labor force grows at rate n, and capital depreciates at rate d.a. Express output per worker (y = Y/L) as a function of capital per worker (k = K/L) and thenatural rate of unemployment (u).b. Write an equation that describes the steady state of this economy. Find the steady state capitalper worker and steady state output per worker.c. Does this production function have constant returns to scale? Explain.True/ False The economy should always run on its full capacity of production.Suppose that output is produced according to the production function Y =Kα[(1 - u)L]1-α, where K is capital, L is the labor force, and u is the natural rate of unemployment. The national saving rate is s, the labor force grows at rate n, and capital depreciates at rate d. Express output per worker (y = Y/L) as a function of capital per worker (k = K/L) and the natural rate of unemployment (u). Write an equation that describes the steady state of this economy. Find the steady state capital per worker and steady state output per worker. Does this production function have constant returns to scale? Explain.
- Suppose that output is produced according to the production function Y =Kα[(1 - u)L]1-α, where K is capital, L is the labor force, and u is the natural rate of unemployment. The national saving rate is s, the labor force grows at rate n, and capital depreciates at rate d. Express output per worker (y = Y/L) as a function of capital per worker (k = K/L) and the natural rate of unemployment (u). Write an equation that describes the steady-state of this economy. Find the steady-state capital per worker and steady-state output per worker. Does this production function have constant returns to scale? Explain.Suppose that the productivity of labor increased. Predict what would happen to the equilibrium real wage and the equilibrium quantity of labor. What happens to unemployment (relative to the natural rate)? Suppose that the productivity of labor fell and that real wages were fixed (at least in short-run). Predict what would happen to equilibrium real wage, the equilibrium quantity of labor, and unemployment rate (relative to the natural rate).Assume that the total productivity in our country decreases (a negative shock to the production function). a) Using a graph, What happens to the demand curve for labor? b) Using a graph, How would the decline in productivity affect the labor market (employment, unemployment and real wages), if labor market is always in equilibrium? c) Using a graph, How would decreases in productivity affect the labor market if unions prevented the decline in real wages?
