Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 9, Problem 10CQ
(a)
To determine
Explain how the long-run equilibrium rate of output is related to the potential
(b)
To determine
Explain how the potential GDP is related to the long-run equilibrium rate of output and actual rate of unemployment and the natural rate of unemployment.
(c)
To determine
Explain how the actual rate of unemployment and natural rate of unemployment are related to the potential GDP and long-run equilibrium rate of output.
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Students have asked these similar questions
Which of the following is most commonly used to monitor short-run changes in economic activity?
Answer
the inflation rate
real GDP
aggregate demand
aggregate supply
Which of the following statements is correct?
a.
Inflation and unemployment are negatively related in the short run and in the long run.
b.
In the short run, unemployment and inflation are negatively related. In the long run they are largely unrelated problems.
c.
In the short run, unemployment and inflation are positively related. In the long run they are largely unrelated problems.
d.
Inflation and unemployment are positively related in the short run and in the long run.
An economy’s natural rate of unemployment is the
a. economy’s long-run target level of unemployment.
b. amount of unemployment that the economy normally experiences.
c. lowest rate of unemployment the economy can achieve.
d. All of the above are correct.
Chapter 9 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- Suppose that government expenditures decrease by 12 from 20 to 8. Fill out column (3) of the Table. Find the new short-run equilibrium real GDP, inflation rate, and the growth rate of nominal wages.arrow_forwardIn the short run, an increase in the quantity of money in the economy causes: a. A decrease in production and an increase in unemployment b. An increase in both production and unemployment c. An increase in production and a decrease in unemployment d. A decrease in both production and unemploymentarrow_forwardWhat is likely to be true at the peak of the business cycle? A. Real GDP, unemployment, and inflation are all likely to increase. B. Real GDP is increasing, unemployment is decreasing, and inflation is increasing. C. Real GDP, unemployment, and inflation are all likely to decrease. D. Real GDP is decreasing, unemployment is increasing, and inflation is steady or decreasing.arrow_forward
- In the long run when governments attempt to target unemployment below the natural rate we can expect inflation crowding out increase in export revenue higher tax revenuearrow_forwardConsider an economy (call it country G) that is implementing climate change legislation more rapidly than other countries (refer to them as ‘row’ for ‘rest of the world’). Explain how this decision by country G could affect its long-run markup. Using diagrams, explain your forecast for the effect of this decision on real wages, inequality and employment in G in the new equilibrium. In the light of your findings, what advice would you give to a policy maker in G?arrow_forwardConsider a demand shock caused by a contraction in the quantity of money in the economy. Analyze the effect on the short-run equilibrium and the long-run equilibrium, with the price level and aggregate supply. Graph Analyze the effect on output, employment, and the natural rate of unemployment? Analyze short-run and long-run. Graph Analyze and compare adjustment effects with and without government intervention.arrow_forward
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