Short-run versus a long-run perspective

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Assume that there is concern that the economy is not recovering from the current recession due to a high unemployment rate. Consequently, the President and Congress are considering the passage of another stimulus package for $200 billion. This package will be targeted towards decreasing unemployment and maintaining the current level of low inflation. How would you structure such a stimulus package? What would a classical economist's approach to this problem be, and how would it differ from a Keynesian's approach? Explain your answer and justify your conclusions.

Using the aggregate supply and demand model, analyze the effect of a more restrictive immigration policy in the U.S. on the following:
• The real wage rate
• The level of unemployment
• The rate of inflation
• Economic growth

Discuss the pros and cons of such a policy from a short-run versus a long-run perspective. Also, include a discussion of the Phillips curve in your analysis.

Reference no: EM13162523

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