Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 9, Problem 10CQ
(a)
To determine
Explain how the long-run equilibrium rate of output is related to the potential
(b)
To determine
Explain how the potential GDP is related to the long-run equilibrium rate of output and actual rate of unemployment and the natural rate of unemployment.
(c)
To determine
Explain how the actual rate of unemployment and natural rate of unemployment are related to the potential GDP and long-run equilibrium rate of output.
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Chapter 9 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- The estimate of the current natural rate of unemployment rate in the United States is approximately Select one: a. 0 percent. b. 0.5 percent. c. 10 percent. d. None of these.arrow_forwardQ)The natural rate of unemployment is the frictional rate that exists in every economy when people move between jobs, and economists refer to full employment when the rate of unemployment is at the natural rate. The natural rate of unemployment in Europe is normally twice and at times three times that of the USA. Can you explain why?arrow_forwardWhen the economy is at full employment, will the unemployment rate be 0%? Explain briefly When the unemployment rate equals the natural rate of unemployment, what kinds of unemployment will continue to exist.arrow_forward
- In the short-run, some costs are flexible and others, such as labor, are rigid. What does the rigidity in labor markets create? Which type/source of unemployment does this affect?arrow_forward4) An increase in the minimum wage will cause: A) a reduction in the equilibrium real wage. B) an increase in the natural rate of unemployment. C) an increase in the equilibrium real wage. D) a decrease in the natural rate of unemployment. E) no change in the natural rate of unemployment.arrow_forwardThe normal rate of unemployment that persists in the economy in the long run is called a. frictional unemployment. b. structural unemployment. c. cyclical unemployment. d. the natural rate of unemployment.arrow_forward
- Fill in the blanks using the number that corresponds to the correct word or phrase natural rate of unemployment unemployment rate less greater Cyclical unemployment structural unemployment Frictional unemployment The variation in unemployment caused by the economy moving from expansion to recession or from recession to expansion (i.e. the business cycle) is known as Economists have a term to describe level of unemployment that occurs even when the economy is healthy: it is called the The unemployment that occurs in the meantime, as workers move between jobs, is called arises when individuals have no jobs because they lack skills valued by the labor market, either because demand has shifted away from the skills they do have, or because they never learned any skills The economy is considered to be at full employment when the actual unemployment rate is equal to the When the economy is below full employment, the is greater than the natural…arrow_forward1) Suppose the job separation rate (s) of an economy is 0.01 and the job findings rate (f) is 0.2. The long run unemployment rate (u) is then 4.7%. Suppose the government is implementing a new law that helps unemployed people find jobs sooner. Which of the following is the most likely outcome? a) s increases and u decreases b) s decreases and u increases c) fincreases and u increases d) f increases and u decreasesarrow_forwardIn a diagram show (A) an equilibrium in real wages and unemployment. Then, show in a diagram (B) a decrease in unemployment benefits and (C) a decrease in markups. Show what happen to unemployment and real wages. Make sure to labe all the axis as well.arrow_forward
- Consider an economy in which there are initially no labour unions and no other constraints on wages. When labour unions are introduced, they successfully bargain collective agreements in about half of firms in the economy. a. Illustrate the effect of these unions on wages and employment in the union sector and the non-union sector and explain with reference to carefully labeled diagrams. b. Do unions create or increase unemployment in this example? Explain with reference to your diagrams. c. Is the change in net employment greater than, equal to, or less than the loss of jobs in the union sector? Explain with reference to carefully labeled diagrams. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardThis is a two-part question dealing with the unemployment rate. Explain how and why it might be possible for the unemployment rate to fall during the worst part of a recession. Secondly, explain how and why it might be possible for the unemployment rate to rise when the economy is in the early stages of recovery.arrow_forwardQUESTION 13 "Consider the labor market in year 2021 but now assume that wages are totally rigid and cannot adjust during 2021. In this year business owners predict low sales for the years to come. As a result, they reduce labor demand. Draw the new equilibrium in a diagram and label it as point C. Use the following equations to find the new equilibrium: LD-70.000-w, LS-b+2w, where b-10,000. What is the unemployment rate? Keep in mind that wages are totally rigid and use the diagram to help you understand what is going on." 43 percent 22 percent. O 20 percent None of the other optionsarrow_forward
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