MACRO ECONOMICS

Macro Economics

Macro Economics

A:

Macro theory predicts that when unemployment increases, Gross Domestic Product, GDP, will fall. Economists like to observe behavior in reality and wonder if the same behavior can be modeled in theory. Using the graph generated from the FRED data base at the St. Louis FED, I plotted both variables. The vertical shaded lines indicated recessions. Does the theory predict? In my opinion, theory predicts that a rise in unemployment will result in a decline in GDP.

B:

Inflation is a sustained increase in the average price of all goods and services produced in an economy. Money loses purchasing power during ...