In April of this year the federal government started to provide $600 per week in extra...

In April of this year the federal government started to provide $600 per week in extra unemployment insurance payments to people. Show graphically and explain how this affects the labor market and the unemployment rate assuming that wages stay constant.

Expert Solution

Federal governments act of unemployment insurance is termed as an expansionary fiscal policy which boosts disposable incomes and thus leads to rise in consumption which boosts aggregate demand curves shifts rightwards and thus causes the real GDP and prices both to splurge.

Assuming wages stay constant, the unemployment rises as firms have lower ability to pay and individual file for unemployment benefit as this looks more lucrative to them.

Rahul Sunny answered 2 years ago

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