Consider the Labor Market Graph above. This graph shows the labor market conditions in a hypothetical country. The natural rate of unemployment in this country is 5 percent. In other words, even during normal times 5 percent of the labor force is unemployed. The natural unemployment is solely due to labor market frictions. The potential GDP in this country equals Yp = 100,000. Okun's alpha equals 2. Currently the labor market is in equilibrium and there is no cyclical unemployment in the country. Suppose that business firms become optimistic about future economic conditions and start investing in plants and equipment and hiring more workers. The increase in demand for goods and services results in 50 percent increase in the general price level. The resulting excess demand for labor causes the money wage to increase by 20 percent. So now we have the following: Nominal (or money) wage = Price level - Real wage =

Q: Jenny wishes to double her financial fund and the bank gives her 8% rate of interest annually, how…

A: Here, Jenny deposited its money in a financial funds at the annual interest rate of 8% and she wants…

Q: What impact do small business owners have on the country’s economy?

A: The objective of this question is to understand the role and impact of small businesses on a…

Q: Does reducing purchasing power of a consumer decrease inflation in the economy?

A: Cost increases for virtually all goods and services in the economy are referred to as inflation.…

Q: Q:7 a,b and c

A: We are going to solve for Pure Strategy Nash Equilibrium to answer this question.

Q: What is the lower present value product?

A: The present value is the current worth of a stream of future cashflows given a certain return rate.…

Q: What are commercial loans?

A: Loan is a type of debt instrument in which a sum of money is borrowed by an individual or a firm…

Q: What was the maximum change in GSP from the government spending

A: Keynesianism has made strides in its ability to solve economic downturns by government intervention,…

Q: OECD's Better Life Index what stands out the most

A: A multinational organization, the OECD has 38 member countries. aims to increase social stability,…

Q: Why are Americans planning on cutting back on spending through the holiday

A: It can be described as the network of an organization that involves the production activities,…

Q: What is business circle?

A: The fluctuation in the economic activity is tracked by the business cycle or circle. In an economy,…

Q: compare the rates of home loans from two different companies

A: If you are to compare the home loan rate of two companies, collect the necessary information like…

Q: What is a SIF?

A: A SIF is a form of Security investment fund that can invest in a variety of assets. It normally…

Q: Calculate the value of APS if Savings is $320 million and income is $420 million

A: The information being given to us is as follows:- Savings = $320 million Income = $420 million We…

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.