Author Question: What is the main difference between classical economists' ideas about economic growth versus what ... (Read 83 times)

rmenurse · **on:** Jun 29, 2018

What is the main difference between classical economists' ideas about economic growth versus what modern evidence suggests?

What will be an ideal response?

Question 2

Explain what type of unemployment changes with the business cycle and how it changes.

What will be an ideal response?

momolu · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

Classical economists assumed that as real GDP per person rises, the population growth rate increased. But, contrary to this assumption, the data show that population growth rate is approximately independent of the economic growth rate. Classical economists concluded that the increase in population, which increases labor supply, would drive real GDP per person back to the subsistence level. But the data show that in advanced nations real GDP per person is well above the subsistence wage rate.

Answer to Question 2

Cyclical unemployment is the unemployment that changes with the business cycle. Cyclical unemployment rises when the economy is in the recession part of a business cycle and decreases when the economy is in the expansion part of the business cycle.