Between March 2001 (the official start of the recession) and March 2002, measured RGDP in the economy actually rose by about 2.5%, even though total employment in terms of hours worked declined by 1.8% and the unemployment rate rose sharply from 4.3% to 5.8% (The GDP Deflator only increased by about 1% - 1.4% during this period)
The ability for the economy to eliminate any imbalances between actual and potential output is sometimes called self-correction. Using an aggregate supply and aggregate demand diagram, show why this self-correcting process involves only temporary periods of inflation or deflation.
Many economists believe that an increase in the minimum wage leads to unemployment. Critics point out that the last time the minimum wage went up the same dire predictions from economists were made, the fact is that there are more people employed today than before the minimum wage increase. Using isoquant-isocost analysis, grap
Unemployment data: Total Unemployment Labor Force Population Year Employment Rate (%) Participation Rate (%) (Millions) 1950 _____ 4.5 57.9 110.5 1960 70.5 5.0 60.0
1. Suppose, in a two-sector model, that individuals receive the following payments from the business sector: wages $520, interest $30 rent $ 10 and profits $80. Consumption spending is $550 and investment is $90. a. Find the market value of output and household saving b. What is the relationship of saving and investment?
Using the aggregate demand and aggregate supply model, draw an economy in a boom with equilibrium national income above full employment GDP. If the government decides to intervene to return the economy to full employment, illustrate and explain what will happen to the economy in the short run and in the long run.
Assume the following equations (in billions of dollars) describe a hypothetical economy where both the price level and interest rates are fixed. C=110 + 0.75(YD) YD= Y - NT NT = 0.2Y I = 175 G = 80 EX = 70 IM = 30 + 0.1Y *NOTE: NT means net taxes. YD means disposable income. i) What is the equilibrium level of in
4 problems that deal with Marginal Rate of Technical Substitution, marginal product, Marginal Revenue Product, returns to scale, optimal level of resource employment
Problem 7.1 Marginal Rate of Technical Substitution. The following production table provides estimates of the maximum amounts of output possible with different combinations of two input factors, X and Y. (Assume that these are just illustrative points on a spectrum of continuous input combinations.) A. Do the two inputs exhibit
1) Appalachia Beverage Company, Inc. is considering alternative proposals for expansion into the Midwest. Alternative # 1: Construct a single plant in Indianapolis, Indiana, with a monthly production capacity of 300,000 cases, a monthly fixed cost of $262,500, and a variable cost of $3.25 per case. Alternative # 2: Const
Product 7.2 Production function Concepts. Indicate whether each of the following statements is true or false. Explain your answers. A. Decreasing returns to scale and increasing average costs are indicated when Q<1. B. If the marginal product of capital falls as capital usage grows, the returns to capital are decreasin
1. Before September 1992, the lira/DM exchange rate could fluctuate by up to 2.25 percent up or down. If central banks ensured that the lira/DM exchange rate band was set in this way and could not be changes, then would have been the maximum possible difference between Italian and German interest rates in one-year lira and DM d
1. Imagine an economy in which consumer expenditure is represented by the following equation: C=50 + .75DI, where DI=Y-T Imagine also that investors want to spend 500 at every level of Income(I=500), net exports are (X-IM=0), government purchases is 300 and taxes are 200. a. What is the equilibrium level of income? b.
Explain the production possibilities frontier. What are the main assumptions?
Explain the relation between employment and efficiency.