Author Question: When the rate of cyclical unemployment is zero, the: a. natural rate of unemployment must also be ... (Read 85 times)

clmills979 · **on:** Jun 30, 2018

When the rate of cyclical unemployment is zero, the:
a. natural rate of unemployment must also be zero.
b. rate of frictional unemployment must be negative.
c. economy must have entered a recessionary stage.
d. Keynesian aggregate supply curve must be horizontal.
e. economy is considered to be at full employment.

Question 2

Suppose that the economy is operating in full-employment equilibrium along the vertical section of the aggregate supply curve. If the aggregate demand curve is reduced by 100 billion in order for the price level to decline by 5 percent, and if the marginal propensity to consume (MPC) is 0.75, then what change in taxes would generate the desired price reduction?
a. 300 billion.
b. -75 billion.
c. -33.3 billion.
d. -25 billion.