2020_Macro_ExCredit1

2020_Macro_ExCredit1 - 1. Assume that annual growth rate of...

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1. Assume that annual growth rate of worker productivity equals 2% and the annual growth rate of the labor force equals 1%. A) What is the annual supply side growth rate equal to? 3% B) Assume a Goldilocks economy. IF real GDP grows by 1%, what will happen to the unemployment rate (increase or decrease)? In this case, what should the Federal Reserve do with interest rates? An increase in unemployment – the fed should lower interest rates. C) Assume a Goldilocks economy. If real GDP grows by 6%, what will happen to the inflation rate? In this case, what should the Federal Reserve do with Interest rates? GDP growth has surpassed supply side- driving up wages and resulting in an increase in the inflation rate. The fed should lower interest rates. 2. A recession started in March 2001. At the same time, President Bush advocated a Decrease in federal income tax rates . A) Which would be more effective in helping the economy to recover from a recession, a tax cut or an equivalent increase in government spending?
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This note was uploaded on 04/15/2008 for the course ECON 2020 taught by Professor Kaplan,jul during the Spring '08 term at Colorado.

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2020_Macro_ExCredit1 - 1. Assume that annual growth rate of...

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