First, explain each of the following: hysterisis and Eurosclerosis. Second, explain how each of them can be used to explain the relatively high natural rate of unemployment in Europe
What will be an ideal response?
Hysteresis suggests that the natural unemployment rate is not independent of the actual unemployment rate. In Europe, high unemployment would result in an increase in unemployment benefits that would cause an increase in the natural rate. Eurosclerosis suggests that the high natural rate is a result of structural problems such as high minimum wage, reluctance of labor unions to accept wage cuts.
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Based on the model of the money market, when real GDP increases, the equilibrium interest rate should
A) stay the same. B) increase. C) decrease. D) increase to the same extent that the supply of money increases.
Which of the following situations is likely to lead to dynamic open market operations?
A) A recession B) An increase in Federal Reserve float C) An increase in Treasury cash holdings D) An increase in currency outstanding
The law of diminishing marginal productivity states that
a. As you expand output, your marginal productivity eventually increases b. As you expand output, your marginal productivity eventually declines c. As you expand output, the total product eventually increases d. None of the above
When the economy is operating at full capacity we are in the _____ range of the aggregate supply curve.
Fill in the blank(s) with the appropriate word(s).