What happens to the unemployment rate in the short run

Reference no: EM131145792

Demand shocks and demand management Assume that the economy starts at the natural level of output. Now suppose there is a decline in business confidence, so that investment demand falls for any interest rate.

a. In an AS-AD diagram, show what happens to output and the price level in the short run and the medium run.

b. What happens to the unemployment rate in the short run? in the medium run?

Suppose that the Federal Reserve decides to respond immediately to the decline in business confidence in the short run. In particular, suppose that the Fed wants to prevent the unemployment rate from changing in the short run after the decline in business confidence.

a. What should the Fed do? Show how the Fed's action, combined with the decline in business confidence, affects the AS-AD diagram in the short run and the medium run.

b. How do short-run output and the short-run price level compare to your answers from part (a)?

c. How do the short-run and medium-run unemployment rates compare to your answers from part (b)?

Reference no: EM131145792

Questions Cloud

Ecognize the brand name as well as the probability : A brand name has a recognition rate of 90%. If the owner of the brand wants to verify this with a small sample of 10 randomly selected consumers find the probability that 9 of the 10 consumers recognize the brand name as well as the probability that ..

What are the responsibilities of the accountants : What are the responsibilities of the accountants at Arthur Andersen? To whom did they owe these responsibilities

Which savings account offers the higher apy : savings account A compounds interest semiannually, while savings account B compounds interest quarterly. Which savings account offers the higher APY?

Provide an example that fits the given description : All foreign currency transactions are foreign transactions, but not all foreign transactions are foreign currency transactions. Provide an example that fits this description, and explain why it is important to understand this concept.

What happens to the unemployment rate in the short run : What should the Fed do? Show how the Fed's action, combined with the decline in business confidence, affects the AS-AD diagram in the short run and the medium run.

Discussion training method as applies to today virtual era : Based on the scenario, assess key roles of the lecture / discussion training method as it applies to today's virtual era. Provide examples from the scenario and the textbook to support your rationale

Find a point estimate and confidence interval estimates : ind a point estimate and confidence interval estimates of the mean account balance of all Century National Bank customers.

Internal recruiting : Discuss the given point below on Internal recruiting OBJECTIVES:• Understand how recruitment can focus on filling positions with employees already employed in an organization • Grasp the issues associated with internal recruitment

Discuss the specific risks and nature of the company : Consider and discuss the specific risks and nature of the company you will be auditing. Create comprehensive audit programs for the cash, financial instruments, sale, and receivables accounts and cycles.

User Account

All Pages