Question

Please answer these three short essay questions.

-스 ESSAY OUESTIONS Full employment, keeping inflation under control, and economic growth are among the major macroeconomic goals of all societies. Why is economic growth a major macroeco- nomic goal? 1. 2. What is potential output and how is it related to the target rate of unemployment and the target level of capacity utilization? Which is greater: potential or actual output during a recession? During an economic boom? 3. What are some of the problems with the interpretation of unemployment statistics that can cause unemployment statistics to underes- timate and to overestimate the true rate of unemployment? How do Classical and Keynesian economists differ in this regard?

Answer 1

1. Economic growth is a major macroeconomic goal for any country. Economic growth refers to the increase in output of an economy. The output of an economy is converted as income for the people. So, economic growth means growth in national income as well. When national income grows people can afford to buy more goods and services. This helps in increasing the standard of living of these people. Therefore, economic growth is directly related to the increasing wellbeing and standard of living of everyone.