Question

1) The Economy cannot be considered fully employed unless the measured unemployment rate is below 1%. Agree or disagree and explain your answer in a paragraph. What is the current actual u-rate for the US economy as of September Data for 2020? Is this unemployment rate below or above or equal to u-rate at full employment (usually called natural rate of unemployment or NAIRU)? What state of the economy do you consider from this u-rate for Sep 2020 (recession, depression or inflation?) and its sources?

2) A) Why would you expect the inflation rate to accelerate if the actual unemployment rate declined to a level lower than the "full employment" unemployment rate (NAIRU) and remained at that low level for a year or longer? Explain your answer in a few
sentences.

.

B) Draw an AS/AD diagram illustrating your answer to part (A) and refer to the current state of the economy of the US to compare in this context. Be sure to label all lines and axes in your diagram clearly.

3) Suppose between Q1, 2018 and Q4, 2019 measured Output in the non- farm business sector increased by 3.6%. During this time period the unemployment rate fell from 4.6% to 3.7% and total hours worked in the nonfarm business sector increased by 3.8%.

What was the % rate of change in labor productivity over this period (Q1 2018 and Q2 2020)? Explain your answer briefly. (Hint: Labor productivity = Y/Labor hours; RGDP growth rate = Labor productivity growth plus and Labor Force Growth rate. No need to use u-rate changes for this question)

Answer 1

Solution:-

Given that

(1)

Economy cannot be considered fully employed uless the measured unemployment rate is below 1%: (Agree or not)

Explanation:

In macreo economics full employment is a condition of the national economy, where all or nearby all persons willing and able to work at the prevailing wages and working conditions are able to do so.

"This is False", we have a constant fluctuation of people entering and existing the market.

In addition of unemployment was this low, inflation would be outrageously high.

"Hence disagree"

current acutal u rate for the US economy as of may date of 2019 is it below or above or equal to (NAIRU):

It is possible for an economy to operate for a time with an unemployment rate less than the "natural" unemployment, (also known as NAIRU)

"This is true", However market will work itself back out to equilibrium.

current US GDP is expected to be 20220.00 USD Billion by the end of this quarter (It is more than NAIRU)

The NAIRU is the natural rate to accelerate. if the actual unemployment rate eclined to a level lower than "full employment" unemployment rate (NAIRU) and remained at lower level for a year or longer because:

The money supply demanded will be much higher than the money supplied causing a shortage.

The only way to compensate is to increase prices to goods and services in the economy.

This excess demand creates inflationary gap and demand pulling inflation takes place.

(B)

AS/AD Diagram

yf = output corresponding to full employment level.

Current state of economy diagram of USA:

(comparing it with the above AS/AD)

Graph:

Here yf is the output level corresponding to full employment shift in aggregate demand curve, AD as unemployment rate decreases indicates by AD1, AD2, AD3.

(3)

Given As per between Q1, 2016 and Q2, 2018 measured output in the non form business sector increased by 3.6%

And this day and age the unemployment rate fumbled form 4.6% to 3.7%.

Hence employment increases.

Total hours worked in non form business sector increased by 3.8%

Labor productivity = output per period / no of labor work

Change in output = 3.6

Change in total labour work = 3.8

Change in labour productivity = =

  

= 0.947

Hence, In this so, the percentage rate of change in labor productivity over the year = 0.947

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