Question

Suppose that a country's economy is operating at an unemployment rate 6% higher than its natural...

Suppose that a country's economy is operating at an unemployment rate 6% higher than its natural rate of unemployment. Then a(n) __________ exists and government should _________.

inflationary gap; increase spending

inflationary gap; decrease spending

recessionary gap; increase spending

recessionary gap; decrease spending

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer :

Option c) recessionary gap ; increase spending

When the country's economy is operating at an unemployment rate that is higher than its natural rate of unemployment, that means a lower level of consumer demand due to the fact that more number of people don't have jobs. Which in turn implies lower production level and thus lower GDP and thus causes a recessionary gap.

In order to fill this recessionary gap the government should increase spending so as to boost money into the economy which will then boost consumer demand and thereby production level will increase and in turn will fill the gap.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
If authorities believe that the natural rate of unemployment is lower than it actually is and...
If authorities believe that the natural rate of unemployment is lower than it actually is and pursue fiscal policies to move economic output to what they believe full employment to be, then which of the following is most likely to occur in the long run? a. An increase in the unemployment rate. b. A recession. c. A depression. d. An increase in the inflation rate Suppose an economy is producing at its potential output. The rate of unemployment corresponding to...
Assume that a country's economy run equilibrium and the actual unemployment lower than the natural rate...
Assume that a country's economy run equilibrium and the actual unemployment lower than the natural rate of unemployment A)This economy is in what state 1 Where is the current output level, in relation to full employment 2 is thete inflation in this economy Why or Why not B)What open-market operation can the country's central bank use to move the economy toward its long-run equilibrium C)As a result of that action above what happens to the Money Supply and equilibrium nominal...
If real GDP at full employment is $5 billion while current GDP is $6 billion, a(n)...
If real GDP at full employment is $5 billion while current GDP is $6 billion, a(n) _____ exists, and will require a _____ in spending to bring the economy back to full employment. a) recessionary gap; decrease b) recessionary gap; increase c) inflationary gap; decrease d) inflationary gap; increase
Suppose an economy is in an inflationary gap. What can we infer about the unemployment rate?...
Suppose an economy is in an inflationary gap. What can we infer about the unemployment rate? It is above 4.5% It is equal to 4.5% It is below 4.5% Draw a graph with SRAS and AD that is operating at the short-run equilibrium AND in an inflationary gap. What must be true? RGDP produced = RGDP consumed RGDP produced > RGDP consumed RGDP produced < RGDP consumed Draw a graph with SRAS and AD that is operating at the short-run...
1. The natural rate of unemployment is: a. the unemployment rate at which the economy is...
1. The natural rate of unemployment is: a. the unemployment rate at which the economy is producing its potential GDP. b. usually equal to 3 percent. c. equal to the seasonal unemployment. d. defined by the government. e. the unemployment rate when none of the work force is unemployed for more than six weeks. 2. If the economy is already producing at its potential, _____. a. the spending multiplier is less than 1/(1 - MPC) in the long run b....
Typically speaking. If the unemployment rate is lower than the natural rate of unemployment we would...
Typically speaking. If the unemployment rate is lower than the natural rate of unemployment we would expect to witness: A. Falling wages and negative inflationary pressure. B. Rising wages and negative inflationary pressure. C. Rising wages and positive inflationary pressure. D. Falling wages and positive inflationary pressure.
Assume an economy that has a natural rate of unemployment of 6% and an Okun’s Law...
Assume an economy that has a natural rate of unemployment of 6% and an Okun’s Law curve with a slope of − 1/2 . (a) Suppose short-run output over the next 4 years is +1%, 0%, -1%, and -2%. According to Okun’s Law, what unemployment rates would we expect to see in this economy? (b) Consider the same economy in which the unemployment rate over the next 3 years is 6%, 7%, and then 4%. According to Okun’s Law, what...
20) Suppose that the natural rate of unemployment in a particular year is 6 percent and...
20) Suppose that the natural rate of unemployment in a particular year is 6 percent and the actual rate of unemployment is 11 percent. Instructions: Enter your answers as whole numbers. a. Use Okun’s law to determine the size of the GDP gap in percentage-point terms. b. If the potential GDP is $500 billion in that year, how much output is being forgone because of cyclical unemployment?
When the unemployment rate is equal to its natural rate—that is, no cyclical unemployment exists—the output...
When the unemployment rate is equal to its natural rate—that is, no cyclical unemployment exists—the output level produced in the economy is: a. below full-employment output. b. at full-employment output. c. always decreasing. d. always increasing. e. above full-employment output.
Suppose the real GDP of an economy is $560 billion dollars and its unemployment rate is...
Suppose the real GDP of an economy is $560 billion dollars and its unemployment rate is 6%. If the natural rate of unemployment is estimated at 4%, what is the value of the country’s potential GDP (LAS) in billions of dollars? Enter your response below rounded to 1 decimal place. Value of the country’s potential GDP (LAS) is ____$ billion.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT