Question

How do these events affect price level, output, and the unemployment rate? Will they go up or down or stay the same in the short-run.

A. Continues to open public lands for oil and gas drilling.

B. Commodity prices are rising, and the labor market continues to tighten.

C. China imposes tariffs on U.S. produced soybeans, wheat and corn.

D. Business firm pessimism continues to grow as Congress fails to reach agreement on new tax policies that would increase business firm profitability.

E. The Federal Reserve continues to increase the Federal Funds Rate.

Answer 1

A. Price level and output would increase; unemployment would decrease, as the economy activity grows
B. Price level increase and output would decrease, unemployment would increase. With tightened labor, employment opportunities would decrease and hence the output
C. Price level increase and output would decrease, unemployment would increase
D. Price level and output would decrease, unemployment would increase, because of unfavourable environment for business the unemployment and output reduces
E. With the increase in funds rate, access to money becomes costly, hence business activities decrease leading to decreased price level and output with increases in unemployment