Using the table attached which describes the condition of the economy in a recession? Open withOutputUnemploymentAY>Y*uu*Y=Y*u=u*DY=Y*u>u*

Answered: Output Unemployment A Y>Y* Uu* Y=Y*…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

Using the table attached which describes the condition of the economy in a recession?

Open with
Output
Unemployment
A
Y>Y*
u<u*
Y<Y*
u>u*
Y=Y*
u=u*
D
Y=Y*
u>u*

Expert Solution

Step 1

u=unemployment rate

u*=natural rate of unemployment

Y=output

Y*=full employment output

Step 2

The recession takes place when the actual unemployment rate is greater than the natural rate of unemployment and the actual output is lesser than the natural rate of output. This can be stated as :

$Y < Y * u > u *$

This shows that actual unemployment is more than expected unemployment. Also, the economy is not able to produce at full employment level. This implies the economy is in a state of recession.

Step by step

Solved in 3 steps

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions