Question
Agree or disagree with each of the following statements and explain your answer.
-The economy cannot be considered fully employed until measured unemployment is less than 1% of the labor force.
- It is possible for an economy to operate for a time with an unemployment rate less that the "natural" unemployment rate. (Also known as NAIRU)
- In 1950, RGDP per person in the U.S. was about $10,000. By 2000, RGDP per person in the U.S. was about $30,000. This implies that the living standard of the typical U.S. resident tripled in 50 years!
- Why do economists expect inflation to accelerate when u < NAIRU?
Explanation / Answer
-The economy cannot be considered fully employed until measured unemployment is less than 1% of the labor force. This is false. We have a constant fluctuation of people entering and exiting the market. IN addition, if unemployment was this low, inflation would be outrageously high - It is possible for an economy to operate for a time with an unemployment rate less that the "natural" unemployment rate. (Also known as NAIRU) This is true. However, the market will work itself back out to equilibrium - In 1950, RGDP per person in the U.S. was about $10,000. By 2000, RGDP per person in the U.S. was about $30,000. This implies that the living standard of the typical U.S. resident tripled in 50 years! This is not true. This has implied that the people are making more income however, the inflation rate has also increased proportionately with RGDP causing a growth at a slower pace, around 3% a year. - Why do economists expect inflation to accelerate when u