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# Unemployment rate

. Use the following to answer questions a. and b.: All figures are in billions of dollars:

a. What is the GPD?
b. What is the NDP?

2. Use the IS curve below for Questions a. and b.:

a. At what point (1, 2, 3, 4 or 5) will the economy be located if aggregate output is below the level of planned spending and, if aggregate output is below the equilibrium level of output.
b. At what point (1, 2, 3, 4 or 5) will the economy be located if aggregate output is below the level of planned spending, and there is an unplanned decline in inventories?

3. Use the LM curve below for Questions a. and b.:

a. At what point (1,2,3,4 or 5) will the economy be located if people are holding more money than
they desire?

b. At what point (1,2,3,4 or 5) will the economy be located if the interest rate is below the
equilibrium level and people are holding less money than they desire?
.

4. Using demand and supply analysis, what are the effects on the exchange rate (appreciation or depreciation) between the British pound and the Japanese yen from:

a. decrease in Japanese interest rates
b. decrease in the price of British goods
c. decrease in British interest rates

5. Assume the government cuts its purchases by \$120 billion. As a result, the budget deficit is reduced by \$40 billion, private domestic saving decreases by \$10 billion, disposable personal income decreases by \$80 billion and the trade deficit is reduced by \$15 billion. By how much has national income (Y) changed?

6. Suppose that the economy starts at equilibrium and the mpc = 0.8. What would be the effect of a 300 increase in taxes once all the rounds of the multiplier process are complete?

7. Answer the next question(s) on the basis of the following information about the hypothetical economy (all figures are in millions).

a.What is the labor force?
b. What is the unemployment rate?

#### Solution Summary

Unemployment rate is defined in the case.

\$2.19