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The figure shows the relationship between an economys output and employment. GDP K<< E, E, E, Employment

The figure shows the relationship between an​ economy's output and employment.

If the economy is currently on F2 and produces Y3  level of​ output, a rightward shift of the labor demand curve with no change in productivity will cause output to​ ________.

A.increase fromY3 to Y5

B.increase from

Y3toY4

C.decline fromY3toY1

D.decline from Y3 to Y2

Suppose that inflation were 6 percent and unemployment were 10 percent. Which of the elements of the​ Fed's dual mandate would it be​ failing?

A.

Price stability

B.

Maximum​ (sustainable) employment

C.

Both

D.

Neither

Suppose that inflation were 6 percent and unemployment were 10 percent. Which of the elements of the​ Fed's dual mandate would it be​ failing?

A.

Price stability

B.

Maximum​ (sustainable) employment

C.

Both

D.

Neither

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Answer #1

1)

Answer: ( B)

The increase in the demand for labor without a rise in productivity does not cause the shift in the production function. Both output and employment rise.

2)

Answer: ( C)

The both inflation and unemployments are higher, thus Fed is failing to maintain the both mandates.

The price level must be close to 2 % while unemployment must be below the 5 %.

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