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Basic Macro Economics Miscellany:

a. Recently it has been argued that the reported unemployment rate

understates the "true" unemployment rate. -Briefly explain the argument.

b. Suppose that inflation is expected to be 2 percent in 2020, inflation, however, turns out to be 3 percent.

-Who is harmed by this unexpected inflation?

c. Suppose the Federal Reserve sets the reserve ratio at 10% and $100 is added to banking system (say by -the Fed buying bonds from the public). How does this affect the money supply. What is the maximum amount of money created?

d. The GDP equation is Y=C+I+G+NX. Describe each factor in this equation. How does fiscal policy and monetary policy affect GDP?

Top Answer

a) The reported unemployment underestimates the real unemployment rate due to the non-inclusion of discouraged workers... View the full answer

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