Author Question: An increase in domestic demand will have which of the following effects in an open economy? A) a ... (Read 40 times)

Anajune7 · **on:** Jun 30, 2018

An increase in domestic demand will have which of the following effects in an open economy?

A) a smaller effect on output than in a closed economy and a positive effect on the trade balance
B) a smaller effect on output than in a closed economy and a negative effect on the trade balance
C) a larger effect on output than in a closed economy and a positive effect on the trade balance
D) a larger effect on output than in a closed economy and a negative effect on the trade balance

Question 2

Explain the natural unemployment rate and its relationship to inflation rate.

What will be an ideal response?

nixon_s · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A

Answer to Question 2

The natural unemployment rate is the unemployment rate at which the inflation rate remains constant. When the actual unemployment rate exceeds the natural rate of unemployment, the inflation rate typically decreases; when the actual unemployment rate is less than the natural unemployment, the inflation rate typically increases.