Question

Explain how we measure economic growth and discuss three specific things that government could do to improve economic growth in the long run. Our current unemployment rate is 3.6% in the United States. Explain as clearly as possible what that 3.6% means (where does that number come from?) Then explain how that compares to our goal for unemployment.

Answer 1

Economic growth refers to the increase in production of goods and services. it is measured through three methods: expenditure, income, and production methods. Total production of goods and services is recorded during the accounting year.

Following steps can be taken by the government to improve growth rate over the long run:

• Government must make expenditure on research and development. or technological development must be pursued.
• Expenditure on infrastructure developments.
• Inputs quantity and quality must be increased. Expenditure on education is key to enhance quality of human resource.

Natural rate of unemployment is considered as full employment which is close to 4 %. US now operating even above the full employment. Unemployment has come down significantly. Such small rate of unemployment is due to frictional and structural reasons. Presence of frictional and structural unemployment implies the situation of full employment.