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Assignment
The following are some data on the U.S. economy taken from the Economic Report of the President (Links to an external site.) (you may have to use the Search tool and type in for example "Economic Report of the President 2014"-or whatever year you are interested in). (Reports from before 2004 can be found at at the historical link (Links to an external site.).)
Year
Unemployment Rate
Real Government Spending (Billions)
Real Civilian Spending (Billions)
1982
9.7%
$947.7
$3672.6
1983
9.6
960.1
3943.6
1996
5.4
1257.9
5670.5
1997
4.9
1270.6
5920.8
Questions:
a. Sketch a production possibilities frontier for the years 1982 and 1983, showing the trade-off between public sector (government) and private-sector (civilian) spending. Assume that resource availability and technology were the same in both years, but notice that the unemployment rate was relatively high.
b. Sketch a PPF for the years 1996 and 1997. Assume that resource availability and technology were the same in both years but higher than in 1982 and 1983. Note that the unemployment rate in the late 1990s was much lower than in the early 1980s.
c. What lessons they learned about the U.S. economy of the past 30 years.
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