A central concept in macroeconomics is the idea of the natural rate of unemployment. Why does it make sense to define full employment to occur when the unemployment rate equals the natural rate of unemployment, instead of when the unemployment rate
equals zero? Elaborate and explain carefully.
What will be an ideal response?
With a growing, dynamic economy where businesses expand and contract, technological change regularly occurs, and people enter and leave the labor market on a continual basis, zero percent unemployment is not possible nor desirable. Frictional unemployment and structural unemployment are normal parts of a healthy, growing economy. With frictional unemployment, people and firms have to search for one another and that takes time. With structural unemployment, technology changes and international competition cause people to have to retrain to match up with the evolving job requirements. Economists, consequently, consider full employment to occur when the only unemployment is frictional unemployment and structural unemployment.
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If a firm triples all of its inputs and its output doubles, it is said to be experiencing
a. diminishing marginal returns b. increasing marginal returns c. diseconomies of scale d. economies of scale e. constant average costs
Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. A bundle of goods that Country B could not make would be:
A. (400 iPods, 250 tablets). B. (300 iPods, 500 tablets). C. (200 iPods, 750 tablets). D. (100 iPods, 1,000 tablets).
Open market operations is the most important and most commonly used tool of monetary policy.
a. true b. false
A decrease in the interest rate, other things being equal, causes a(n):
A. upward movement along the demand curve for money. B. downward movement along the demand curve for money. C. rightward shift of the demand curve for money. D. leftward shift of the demand curve for money.