Question

The Business Cycle (Study Plan 12.1) 1. Debate on Causes of Unemployment Two economists are debating the cause of a high unemployment rate. One economist argues that there is not enough government spending. The other says high unemployment is a structural problem-people who can't move to take new jobs because they are tied down to burdensome mortgages or firms that can't find workers with the skills they need to fill job openings. a. Which business cycle theory would say that the first economist is correct and why b. Which business cycle theory would say that the second economist is correct and why?

Answer 1

Answers=

(A) The Keynesian business theory say that the first Economist is correct because there are major reasons are followed.

-First, government spending can reduce unemployment by directly creating jobs. Second, government is big and centralized. Instead of subtly nudging millions of individuals and businesses to increase investment, government can turn on a fire hose. so the above resoanr say that first economist is correct

(B) Real Business Cycle Theory would say that the second economist is correct because According to, Real Business Cycle Theory attributes the presence of unemployment as a consequence of structural changes in the economy on the account of technical changes. When a technology of production changes, it either ousts labor with capital or a labor with old skills with labor having new and advance skills compatible with the technology. In this way, potential GDP of the economy can change and with that, the natural rate of unemployment.so the second economist is correct.