According to the Austrian business cycle theory, a key feature of a deflationary depression is  A) an increase in money and credit B) unrepayable debts lead to financial system losses C) businesses that are too big to fail must be subsidized D) higher prices

Given an economy with an unemployment rate of 7%,  GDP growth of 1% and an inflation rate of 1%, where would this economy likely be on the business cycle?

Question 43 In a business cycle, a period from trough to peak may be referred to as a recurrence a contraction an expansion all of the above none of the above

Consider a one-sided search model of unemployment we developed in class. In class discussion we never mentioned how unemployment insurance benefit, b, is financed. For this question, you are going to incorporate it to the model. Let's assume that in order to finance the unemployment insurance benefit, b, the government imposes lump-sum tax, T, on each employed worker. Assuming that the economy is in a long-run steady-state equilibrium, the total amount that needs to be paid out to unemployed workers is bU, where as usual, U repre- sents the fraction of unemployed. The total amount of tax collected (which we can interpret as an unemployment insurance premium) from employed workers is (1U)T. The government runs balanced budget, hence, bU = (1 – U)T. In this new setting, please show the effect of an increase in unemployment in- surance benefits, b, on reservation wage, w*, and on the long-run unemployment rate, U. Using graphs clearly demonstrate how the behavior of this model is…