uestion 11 of 15 Sapling Learning Use the table below to answer the questions. u

Question

uestion 11 of 15 Sapling Learning Use the table below to answer the questions. u = unemployment rate, u-natural rate of unemployment, Y output, Y's full employment output Year 2007 2008 2009 3.5% AP?o 5% u* 4% 4 4 Given the information in the table select the answer that best describes the condition of this economy in 2007 o There is not enough information to assess the o The economy is in an exceptional expansion because 0 The economy is healthy, where Y yo. condition of the economy output is below potential. The economy is in an exceptional expansion because The economy is in a recession. O What is the value of cyclical unemployment in 2009? Number ? Hint Previous Give Up &View; Soluti about us | careers privacy policy

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Ans.

1) D. The economy is in an exceptional expansion because Y>Y* .

In 2007 unemployment rate is 3.5% whereas natural rate of unemployment is 4%. That means in year 2007 unemployment rate was less than natural rate of unemployment such that economy operates above full employment.So real output is greater than potential output.That means there is an expansion in economy because output is more than full employment output.

2) Cyclical unemployment is difference between actual rate of unemployment and natural rate of unemployment.Here in year 2009 actual unemployment rate is 5% and natural rate of unemployment is 4%. So difference between them is 1%.Thus in year 2009 the cyclical unemployment is 1%.

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