Increase in unemployment benefits affect output

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Reference no: EM139341

Q1. Consider and economy with output equal to the natural level of output. Now Assume there is an increase in unemployment benefits.

a. Explain how the effect of an increase in unemployment benefit on the position of AD and AS curves in the short run and in the medium run.

b. Explain how will the increase in unemployment benefits affect output and the price level in the short run and in the medium run?

Q2. If the consumption function is C= $200 billion + .9Y, Explain how more do consumers spend with incomes of $3 trillion? Explain how more do they save?

Reference no: EM139341

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