WA # 2
1. In your own words, explain the difference between the natural rate of unemployment and the actual rate of unemployment as reported by the US Department of Labor. Do NOT just discuss numbers, what is the difference? (10)
2. Draw YOUR OWN graph of a business cycle, with each phase clearly labeled, that exhibits long run economic growth. For each phase, be certain to address what is happening within each phase of the cycle in the economy, in detail, especially with regard to GDP, unemployment, income, inflation and interest rates. YOUR OWN graph, which MEANS YOUR OWN GRAPH. IF YOU COPY A GRAPH, YOUR SCORE ON THIS QUESTIONS WILL = 0. (40)
3. How do the level of technology and the quantity of capital per hour worked cause long run economic growth? How is this connected to labor productivity? 10 pts
4. In your own words, explain what the supply of loanable funds is? How it is related to the interest rate? Then, do the same for the demand for loanable funds. (10)
5. What causes the supply of loanable funds to decrease? What impact does that have on the marketplace? Then, what causes the demand of loanable funds to decrease and what impact does that have on the marketplace? 10 pts.
6. Consider the per unit production function.
a. What is diminishing returns as it relates to the function? 5 pts
b. How can nation still grow with diminishing returns? 5
c. What is the difference between increases in output caused by technological change and increases in output with diminishing returns? Explain in detail and relate back to the production function. 10
