1. What is the relationship between LRAS and the natural rate of unemployment?
a. If the economy currently has a frictional unemployment rate of 2%, structural unemployment of 2%, seasonal unemployment of 1/2%, and cyclical unemployment of 2%, what is the natural rate of unemployment? Where is the economy operating relative to LRAS?
b. What happens to the natural rate of unemployment and LRAS if structural unemployment rises 3% and everything else stays the same as in part a?
c. What happens to the natural rate of unemployment and LRAS if structural unemployment falls 1.5% and the other numbers are the same as part a?
1. What is the relationship between LRAS and the natural rate of unemployment?
a. If the economy currently has a frictional unemployment rate of 2%, structural unemployment of 2%, seasonal unemployment of 1/2%, and cyclical unemployment of 2%, what is the natural rate of unemployment? Where is the economy operating relative to LRAS?
b. What happens to the natural rate of unemployment and LRAS if structural unemployment rises 3% and everything else stays the same as in part a?
c. What happens to the natural rate of unemployment and LRAS if structural unemployment falls 1.5% and the other numbers are the same as part a?
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Related questions
QUESTION 5
Which of the following statements has been proposed as a benefit of passive policy making?
| Passive policy making utilizes the rational expectations hypothesis. | ||
| Passive policy making allows for making immediate changes in response to an anticipated change in economic performance. | ||
| When using passive policy making there is no tradeoff between price stability and unemployment. | ||
| Passive policy making does not wait for the time lag between recognition of a problem and policy action before engaging in economic policies to stabilize the economy. |
1.47 points
QUESTION 6
The idea of policy making taking place in response to a predetermined set of rules is referred to as
| discretionary policy making. | ||
| passive policy making. | ||
| Keynesianism. | ||
| active policy making. |
1.47 points
QUESTION 7
What types of unemployment will still exist when the economy is at the natural rate of unemployment?
| frictional and cyclical unemployment only | ||
| frictional, structural, and cyclical unemployment | ||
| frictional and structural unemployment only | ||
| structural and cyclical unemployment only |
1.47 points
QUESTION 8
The natural rate of unemployment is
| the unemployment rate that exists in long-run equilibrium, after adjustments to all changes have occurred. | ||
| the unemployment rate when there is no structural unemployment. | ||
| the unemployment rate when there is no structural or cyclical unemployment. | ||
| zero. |
1.47 points
QUESTION 9
According to the text, minimum-wage laws cause increases in
| employment possibilities. | ||
| structural unemployment. | ||
| poverty. | ||
| productivity. |
1.47 points
QUESTION 10
During a recession, the overall unemployment rate
| exceeds the natural rate of unemployment. | ||
| falls below the natural rate of unemployment. | ||
| falls rapidly. | ||
| equals the inflation rate. |
1.47 points
QUESTION 11
Cyclical unemployment is
| the unemployment due to the unemployment benefits and welfare programs of the government. | ||
| the unemployment due to union activities and government-imposed restrictions to entry into specific occupations. | ||
| the difference between the actual unemployment rate and the natural rate of unemployment. | ||
| the difference between the unemployment rate when the economy is in a recession and the unemployment rate when the economy is at the peak of an expansion. |
1.47 points
QUESTION 12
Which of the following unemployment rates can be negative?
| the natural unemployment rate | ||
| the seasonal unemployment rate | ||
| the official unemployment rate reported by the Bureau of Labor Statistics | ||
| the cyclical unemployment rate |
1.47 points
QUESTION 13
An unexpected increase in aggregate demand typically causes
| the price level to increase but has no effect on the unemployment rate. | ||
| frictional unemployment to increase but structural unemployment to decrease. | ||
| the price level to increase and the unemployment rate to fall. | ||
| the price level to increase and the unemployment rate to increase. |
1.47 points
QUESTION 14
The rate of unemployment below which the rate of inflation tends to rise and above which the rate of inflation tends to fall is known as the
| non-accelerating-inflation rate of unemployment (NAIRU). | ||
| contrary rate of unemployment. | ||
| Phillips rate of unemployment. | ||
| menu cost rate of unemployment. |
1.47 points
QUESTION 15
Based on the work of economist A.W. Phillips, economists concluded that
| high inflation rates are associated with low unemployment rates. | ||
| higher rates of inflation are associated with higher rates of unemployment. | ||
| there is no trade-off between inflation and unemployment. | ||
| unemployment can be effectively combated by raising wages. |
