1. Give two reasons why there may be a short-run tradeoff between unexpected inflation and the unemployment rate? Unexpected inflation reduces real wages W/P, so labor becomes cheaper (adaptive expectations). So with cheaper labor firms hire more workers to satisfy equilibrium condition of MRPL=W/P MRPL - Marginal revenue product of labor W/P - real wage W - nominal wage P - price level (change means inflation). Expected inflation is assumed making labor contract, which does not in general
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A. Suppose that real GDP is currently $97 billion per year and natural real GDP is currently $100 billion. Measured as a percentage, what is the GDP gap? Natural Real GDP – Real GDP/ Natural Real GDP $100 - $97/100 = 3 The GDP gap is 3% B. Suppose natural real GDP is growing by $4 billion per year. By how much must real GDP have risen after two years to close the GDP? By the second year the natural real GDP will be $108. In order for the gap to close the real GDP would have to rise by the
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COMPONENTS OF ECONOMIC FREEDOM AND GROWTH: An Empirical Study Eliezer B. Ayal and Georgios Karras University of Illinois at Chicago * Published in the Journal of Developing Areas, Vol.32, No.3, Spring 1998, 327-338. Publisher: Western Illinois University Abstract Out of thirteen recently isolated components of economic freedom our study identifies six which are shown to be statistically significantly related to multifactor productivity and capital accumulation. Policy implications, which
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Industrial Policy – 1991 Introduction The Industrial Policy announced on July 24, 1991 by the Finance Minister Dr. Manmohan Singh heralded the economic reforms in India and sought to drastically alter the industrial scenario in our country. The Industrial Policy Statement of 1991 stated that “the Government will continue to pursue a sound policy framework encompassing encouragement of entrepreneurship, development of indigenous technology through investment in research and development, bringing
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Why we need a second stimulus package ? The concern about debt in this country is mounting by the day as we have more and more government spending in order to get us out of the recession. Do we need to continue that spending in order to prop up the economy and then worry about the debt? You might say no because the country is far too deep with their debt but The answer is yes and here’s why. As you cut back expenditure the economy goes down, tax revenue go down, you don’t improve the
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Introduction: In this term paper we will discuss the BOP and some issue related to this topic .first, we will discuss one part in the balance of payment of Kuwait ,which is the current account. Second we will find two relationship with the balance of payment which are 1) GDP and BOP,2) inflation and BOP . Kuwait Current Account The current account of Kuwait and other countries has three components: 1) the exports of goods and services minus the imports of goods and services; 2) the difference
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Term Paper Vietnam, a prominent future of US outsourcing and offshoring In the last decade, many major corporations and small companies in the United States relied heavily on outsourcing and offshoring to foreign countries such as Vietnam. According to U.S consultancy group, Vietnam ranks as one of the ten most attractive off shoring and outsourcing destinations in the world. IT companies are constantly under pressure to produce software products more efficiently within tight budgets. Vietnam’s
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Global Economic Crisis – Immediate Solution The turbulence we are going through is unprecedented in the world History. What started as A financial institution failure, affected not only the leading financial institutions in the world but also the major developed economic systems in the world leading to a systemic failure. Unlike in the past , when it had an impact on only a few countries and few asset classes, this time, the crisis had its effect on almost all countries in the world and all
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ECONOMICS FOUNDATION - MBA 502 Homework Assignments Chu Nguyen Quynh Huong Class: M0111 Assignment 1 – Microeconomics 1. The Basics of Supply and Demand (Pindyck – Chapter 2): Excercises 9, 10 (page 63). Excercises 9: a) The original demand is QD =18-3P And supply is QS =-6+9P The 20-percent increase in demand means that the new demand is 120 percent of the original demand, so the new demand is Q ́D =1.2QD Q ́D =1.2(18–3P)=21.6–3.6P. The new equilibrium is where Q ́D equals the original
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• The business cycle- unemployment, inflation and output (GDP) growth • Comparison of the GDP of Macedonia with other countries. Macedonia is a poor country with the latest estimation on this article of the year 2008, with 5.3% rate on its GDP growth, which puts this country to the 79th country of GDP growth. There have been few factors in the past that have affected the growth of output in Macedonia’s history, such as the declaration of independence and the Greek economy embargo over the flag
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