Reference no: EM131486679
Question 1 - Explain what economists mean by 'full employment'.
Discuss the likely impact of each of the following on the unemployment rate:
a. The length of time workers are eligible to receive unemployment benefit payments is reduced.
b. The government passes a law making trade unions illegal.
c. The minimum wage is raised by 50 per cent.
Question 2 - Explain whether you would rather be a borrower or a lender during a period of unexpected rising inflation. Would your answer change depending on whether a lender supplies a fixed-interest-rate loan or a variable-interest-rate loan?
Question 3 - Explain whether you agree with the following statement: 'The impact of inventory increases on the business cycle depends upon whether they are planned or unplanned.'
Next, explain how the adjustment to macroeconomic equilibrium occurs when spending is less than production. Is it possible for the economy to be in macroeconomic equilibrium at a level of real GDP that is greater than the potential level of GDP? Illustrate using a 45o line diagram.
Question 4 - Briefly explain whether you agree with the following statement: 'The reason the aggregate demand curve slopes downward is that when the price level is higher, people cannot afford to buy as many goods and services.' Explain your answer using the relationship between the aggregate demand curve and the aggregate expenditure.