ECON112 PRINCIPLES OF ECONOMICS 2 - 2022 Assignment 3
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ECON112 PRINCIPLES OF ECONOMICS 2 - 2022
Assignment 3
1. Real GDP and Potential GDP for Alba for the years 2018 and 2021 are given below.
|
Year |
Real GDP |
Potential GDP |
|
2018 |
$10,720 |
$10,325 |
|
2021 |
$12,355 |
$12,962 |
a) Determine whether Alba is experiencing a recession or an expansion in 2018 and
2021 and briefly explain your answer. (1 mark)
b) Based on Okun’s law as defined in Frank and Bernanke, what is the cyclical rate of unemployment in Alba in 2018 and 2021? Show all your working. (2 marks)
2. Based on Okun’s law as defined in Frank and Bernanke, if the natural rate of unemployment is 5%, what is the actual rate of unemployment if output is 2% below the potential output? What if output is 2% above potential output? (2 marks)
3. In Macroland potential output equals $8,000 billion and the natural rate of unemployment is 5%. Based on Okun’s law as defined in Frank and Bernanke, if the actual unemployment rate is 8%, what is the output gap? What is Macroland’s actual output (real GDP)? (3 marks)
4. Use the diagram below to answer the following question.
Based on the Keynesian-cross diagram above, if actual output (Y) equals 6,000, should firms increase, decrease or maintain their production to achieve short-run equilibrium?
Briefly explain your answer. (2 marks)
5. In your own words, briefly explain why the aggregate demand curve downward- sloping. (2 marks)
6. In your own words, briefly explain why the long-run aggregate supply curve vertical.
(1 mark)
7. In your own words, briefly explain why the short-run aggregate supply curve upward- sloping. (2 marks)
2022-09-22