In one to two sentences, explain how an increase in business expenditures could affect aggregate supply, and how that effect on aggregate supply could affect household spending.(2 points)

Answer 1

An increase in business expenditures can enhance aggregate supply by increasing production capacity and efficiency, leading to higher output. This boost in aggregate supply can reduce prices, increase employment, and raise incomes, which may encourage household spending as consumers feel financially more secure.

Answer 2

What are the causes of a recession? What happens to a county's output and prices after a recession has ended? Write 3-5 sentences.(4 points)

Answer 3

Recessions are often caused by a combination of factors, including decreased consumer and business confidence, tighter monetary policy, rising interest rates, or external shocks such as natural disasters or geopolitical events. During a recession, a country's output typically declines as businesses reduce production and may lay off workers, while prices may stabilize or even fall due to decreased demand. After a recession has ended, output generally starts to recover as consumer spending and business investment pick up, often driven by lower interest rates and improved economic sentiment. Prices may gradually rise again as demand increases, leading to a potential rebound in inflation, as the economy moves toward its previous growth trend.

Answer 4

Explain the three main types of unemployment experienced within an economy. Provide at least one example demonstrating each type of unemployment.(4 points)

Answer 5

The three main types of unemployment are:

1. Frictional Unemployment: This occurs when individuals are temporarily unemployed while transitioning between jobs or entering the workforce for the first time. For example, a recent college graduate searching for their first professional job represents frictional unemployment.

2. Structural Unemployment: This type results from shifts in the economy that create a mismatch between the skills of the workforce and the skills needed by employers. For instance, workers in traditional manufacturing industries may become structurally unemployed as automation and technology advancements reduce the demand for their skills.

3. Cyclical Unemployment: This occurs due to downturns in the business cycle, where lack of demand leads to job losses. An example of cyclical unemployment is during a recession when companies across various sectors lay off employees to cut costs as consumer spending declines.

Answer 6

Question
In one to two sentences, explain how the money for a negative tax for low-income earners could be redistributed from high-income earners.(2 points)

Answer 7

Money for a negative tax for low-income earners could be redistributed from high-income earners through a progressive tax system, where higher earners pay a greater percentage of their income in taxes. This additional revenue can then be allocated to fund the negative tax program, effectively providing financial support to those in lower income brackets.

Answer 8

How do improvements in technology and human capital influence productivity, economic growth, and standard of living within an economy?(2 points)

Answer 9

Improvements in technology enhance productivity by enabling more efficient production processes and innovation, which can lead to lower costs and greater output. Additionally, investments in human capital through education and training enhance the skills of the workforce, further driving productivity; together, these factors contribute to economic growth and an improved standard of living, as higher productivity typically results in increased wages and better quality goods and services.