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effects of the increase in unemployment benefits

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Suppose that the unemployment benefits provided by the private sector (firms) are increased permanently, please answer the following questions:

A) What will happen to Y (GDP), r (real interest rate), P(price level), and I(investment), in the short run?

B) What will happen to Y, r, P, and I, in the long run?

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Effects of the increase in unemployment benefits are clearly reiterated.

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A) In the short run, an increase in unemployment benefits will reduce the incentive for those on unemployment to seek employment. Also, there will be a reduced incentive for those that are working to value their jobs as highly and continue working. Using the AD/AS model to analyze this, we would expect the SRAS curve to fall and shift to the left. ...

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