Question

In: Economics

When unexpected inflation is zero, the corresponding unemployment rate is not zero because: A) the output...

When unexpected inflation is zero, the corresponding unemployment rate is not zero because:

A) the output gap is negative.

B) the output gap is positive.

C) structural unemployment and frictional unemployment are not zero.

D) cyclical unemployment is high and positive.

If an economy has an output gap of 0%, this means the economy is:

A) suffering from hyperinflation.

B) at its highest sustainable rate of production.

C) experiencing cyclical unemployment.

D) unsustainable in the long run.

Expert Solution

Answer 1

When unexpected inflation is zero, the corresponding unemployment rate is not zero because:

C) structural unemployment and frictional unemployment are not zero.

Reason: Economists estimate that about 4 %to 5% unemployment is Full Employment. This is called the "full employment rate of unemployment", or the "natural rate of unemployment" and it includes structural and frictional unemployment

Answer 2

If an economy has an output gap of 0%, this means the economy is:

B) at its highest sustainable rate of production.

Reason:

An output gap indicates the difference between the actual output of an economy and the maximum potential output of an economy expressed as a percentage of gross domestic product (GDP). A negative output gap suggests that actual economic output is below the economy's full capacity for output while a positive output suggests an economy that is outperforming expectations because its actual output is higher than the economy's recognized maximum capacity output.

Rahul Sunny answered 7 months ago

The natural rate of unemployment is the unemployment rate at which the inflation rate has no...

The natural rate of unemployment is the unemployment rate at which the inflation rate has no tendency to increase or decrease. However, the natural rate of unemployment is not fixed. What causes changes in the natural rate of unemployment? Which of the following will not cause the natural rate of unemployment to change? A. Many previous periods with high rates of unemployment. B. Changes in the money supply resulting from monetary policy. C. Changes in labor market institutions. D. Changes...

Inflation, Unemployment, & Economic Policies (v.v.i) Define – inflation rate, unemployment rate, What are the types...

Inflation, Unemployment, & Economic Policies (v.v.i) Define – inflation rate, unemployment rate, What are the types of employment? Discuss about the natural rate of unemployment What is recession? What are the impacts of recession on business & workers? What happens in a recession and why do recession happens? Aggregate Demand Describe briefly about aggregate demand Describe briefly about aggregate supply What do u mean by demand pull inflation? What do u mean by cost-push inflation?

Cost-push inflation: A. reduces real output. B. increases real output. C. reduces the unemployment rate. D....

Cost-push inflation: A. reduces real output. B. increases real output. C. reduces the unemployment rate. D. raises the natural rate of unemployment. Which of the following is the largest dollar amount in the United States? A. disposable income B. personal income C. gross domestic product D. national income Real GDP is: A. the nominal value of all goods and services produced in the economy. B. the nominal value of all goods and services produced in the domestic economy corrected for...

Using the model that predicts the inflation and unemployment rate, show what happens when there is...

Using the model that predicts the inflation and unemployment rate, show what happens when there is a decrease in aggregate demand, and then the government conducts perfect counter-cyclical policy (before expectations adjust)

8. Policy makers may become concerned if the unemployment rate is too low because: a. output...

8. Policy makers may become concerned if the unemployment rate is too low because: a. output growth rate may decrease. b. stock prices may fall. c. an exchange rate crisis might occur d. inflation might increase.

(1)There is no long-run tradeoff between inflation and unemployment because

(1)There is no long-run tradeoff between inflation and unemployment because A inflation always returns to the baseline level. B real GDP always returns to potential GDP. C potential GDP declines as the inflation rate raises. D the aggregate demand curve always shifts back to its baseline position. (2)The “Goldilocks economy” refers to a situation in which (Check all correct answers.) A inflation is lower than the target rate.B inflation is equal to the target rate.C real GDP is equal...

When the economy is at its full employment level, is the unemployment rate zero? Justify your...

When the economy is at its full employment level, is the unemployment rate zero? Justify your answer.

Under the New Keynesian model, what happens to inflation and unemployment rate when nominal interest rate...

Under the New Keynesian model, what happens to inflation and unemployment rate when nominal interest rate increases?

What is a zero unemployment rate not a goal of policymakers? Explain the level of unemployment...

What is a zero unemployment rate not a goal of policymakers? Explain the level of unemployment that the economy experiences in "normal times"? Why does that unemployment occur?

When the actual and expected (or anticipated) inflation rates are both zero, the money interest rate...

When the actual and expected (or anticipated) inflation rates are both zero, the money interest rate must equal the real interest rate. How might inflation affect the money interest rate? The nominal interest rate is determined by the forces of supply and demand in the loanable funds market (in millions of dollars). The following calculator shows the market for loanable funds. You can shift the supply and demand curves by changing the values of the supply and demand shifters on...