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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Chapter 11, Problem 9CQ
To determine
The impact of increase in aggregate
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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 the future?
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Economics: Private and Public Choice (MindTap Course List)
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- “Households tend to increase their spending during a recession because they realize that more spending will cause firms to hire more workers and the problem of unemployment will be solved.” Do you agree or disagree? Explain.arrow_forwardHowever, the labor market is a derivative of the goods market in the Keynesian theory (“principle of effective demand”). Therefore, unemployment is explained by the lack of demand in the goods market. According to the Keynesian theory, what would happen to the unemployment rate if real wages fall? How should unemployment be reduced?arrow_forwardEmpirical studies indicate that the long-run trend in real GDP of the USA has an upward trend. How is this possible given business cycles and macroeconomic fluctuations? What factors explain the upward trend despite the cycles?arrow_forward
- Suppose that a decrease in the demand for goods and services pushes the economy into recession. What happens to the price level? If the government does nothing, what ensures that the economy still eventually gets back to the natural rate of output?arrow_forwardAt break-even income level, households’ saving is zero. 1) True 2) False Cyclical unemployment is zero if there is no inflation. 1) True 2) Falsearrow_forwardChanges in which factors could cause aggregate demand to shift from AD to AD1? What could happen to the unemployment rate? What could happen to the inflation rate?arrow_forward
- Draw a correctly labeled graph of the long-run aggregate supply and short-run aggregate supply curves. Show each of the following in your graph. Assume that the economy of your graph's country has an actual unemployment rate that is less than the natural unemployment rate. Help with the last two bullet points.arrow_forwardTrue or False? Looking along the aggregate demand curve, deflation will lead to a lower level of GDP.arrow_forwardUnemployment can be caused by a decrease of aggregate demand OR a decrease of aggregate supply. Do you agree or disagree and why? In each case, specify the price-level outcomesarrow_forward
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