QUESTION 19 If 1 out of 100 workers are separated from their job every month, wh
ID: 1162184 • Letter: Q
Question
QUESTION 19 If 1 out of 100 workers are separated from their job every month, what does the job finding rate need to be in order to maintain an unemployment rate of 5%? 0.20 0.05 0.19 0.10 QUESTION 20 Use your understanding of both the short run and long run theories taught in this course to answer this question. A government budget deficit induced by an increase in government spending O all of the above will reduce the economy's savings rate thus reducing the long run level of GDP per worker O will stimulate aggregate demand thus positively affecting real GDPin the short run Owill crowd out investment thus negatively affecting real GDP in the long runExplanation / Answer
ans19.
we know, unemployment rate = job separation rate / (job separation rate + job finding rate )
0.05 = 0.01 / (0.01+ job finding rate )
=> 0.05 ( 0.01+ job finding rate ) = 0.01 => job fnding rate = (0.01/0.05) -0.01 = 0.19
ans 20 .
correct ans is all of the above
as gov spending will initially stimulate AD in short run , but as gov. spending increase , interest rate will also increase thus crowding out the pvt. investment in long run. also , in long run as deficit will increase savings will automatically reduce thus reducing the GDP per worker . hence, all 3 options are correct .