Business Essay

1239 words - 5 pages

1a. Unemployment rate: 10/(250-100) x 100% = 6.67%

1b. Unemployment rate: 10//(250-100+25) x 100% = 5.71%

1c. During periods of high unemployment, the probability of losing a job increases and the probability of finding a job decreases. There is a negative relationship between changes in the rates of real GDP growth and unemployment. When the unemployment rate is high, the government has to provide subsidy to them, this will create a heavy burden on the budget. Also, this will decrease the consumption and demand of citizens, which this will slow down the economic growth.

1d. If GDP is growing but the employment is stagnant or falling, it may be because of the advanced technology. ...view middle of the document...

Besides, employers can make an agreement to those training employees before they train so as they cannot easy to leavethe company when they just finish the training.
3a. If the unemployment rate and other factor (Z) are constant and the expected price level increase, the nominal wage will increase.

3b. If the expected price level increases and nominal wage stay the same, the real wage will decrease. The workers may want to have more wages, or may leave the job and find a new job that has higherwage.

3c. The natural rate of unemployment is the equilibrium unemployment rate, un, is such that the real wage chosen in wage setting and is equal to the real wage implied by price setting. Higher unemployment is required to make workers accept this lower real wage, leading to an increase in the natural rate of unemployment.

4a. The Philips Curve is almost a mirror image of Aggregate Supply Curve. When output rises, unemployment tends to fall, so the short-run Philips curve is negatively sloped. On the other hand, the price expectations fixed, an increase in the price level provides an incentive for firms to increase production, causing the short-run aggregate supply curve to be positively sloped.

4b. In a short run, firms possess one fixed factor of production. This does not however prevent outward shifts in the aggregate supply curve, which will increases real GDP at a given price. A positive correlation between price level and output is shown by the aggregate supply curve. In a long run, only capital, labor, and technology affect the LRAS in the macroeconomic model because at this point everything in the economy is assumed to be used optimally. In most situations, the LRAS is viewed as static because it shifts the slowest of the three. In the long run,the Aggregate supply curve is shown as perfectly vertical, reflecting economists' belief that changes in aggregate demand have an only temporary change in the economy's total output. In a medium run, as an interim between aggregate supply curve in the short run and long run, the aggregate supply curve in the medium run form slopes upward and reflects when capital as well as labor can change. More specifically, the Medium run aggregate supply is like this for three theoretical reasons, namely the Sticky-Wage Theory, the Sticky-Price Theory and the Misperception Theory.

4c. The slope of the long run aggregate supply curve is vertical as it is independent to the price level and the money is assumed neutral.

4d. When governments cut their domestic spending, the aggregate demand curve will shift to the left. It is because the aggregate demand curve depends on the output. If governments...

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