ECON105 El Camino College Economics & Spending Questions

Question Description

I’m working on a economics writing question and need an explanation and answer to help me learn.

1. When the economy is at the recovery stage, both output gap and growth rate are positive? True/ False? Please Explain. 
2. Assume that input prices decrease and the government decides to cut spending. In this scenario, what would happen to output (Y), the overall price (P), and unemployment (U)? Please illustrate these changes on a graph. 
3. Please discuss the impact of monetary policy tightening with regards to both unemployment and inflation with respect to both the short run and long run? 
4.  Assume that the unemployment rate (U) equals 8 %. Suppose that the natural rate of unemployment (U*) equals 5 % and the coefficient ? is 0.6. Use Okun’s law to answer the following: A. Find the output gap ratio to the potential output? B. If the potential output equals 160, calculate the actual output? 
5.  On a graph, show the impact of the permanent  the economy supply shock on unemployment and inflation in the long run and in the short run? 

Explanation & Answer:
5 Answers


Unemployment Rate

Unemployment and Inflation

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