Answer to Question #228338 in Macroeconomics for jennifer atkinson

Question

a) Define the term `recession` What are its symptoms ? [ 4 marks ]

b) Explain the level and types of unemployment that you would expect to become more prominent in a recession. [ 4 marks ]

c) Using a AD-AS diagram, explain how an economy recovery from a recession. [ 10 marks ]

Answer 1

a) Recession refers to decline in economic activities. Its symptoms include high interest rates, reduced real wages and declined gross domestic products.

b)structural unemployment occurs due to economic disruptions which mismatch people skills with available jobs.

cyclical unemployment occurs because of less demand for labor.

frictional unemployment occurs as workers leave their jobs in search for new ones.

c)

To stimulate economic growth , prices has to reduce so as to simulate aggregate demand and increase output.