Answer to Question #165275 in Microeconomics for Sonam Peldon

Question

1.     Explain the effect of this crisis on USA’s labour market in long-run? (200 words) (1.5 marks)

2.   Explain the effect of this crisis on the levels of Americans’ consumption in long-run? (200 words) (1.5 marks)

3.    Explain the effect of this crisis on the levels of USA’s investment in long-run? (200 words) (1.5 marks)

4.   Explain the effect of this crisis on USA government’s Budget in long-run? (200 words) (2 marks)

5.   Assume that you are a policy maker in USA’s government and central bank; how you can recover the crisis by changing macroeconomic variables? (500 words) (3 marks)

6.   During the crisis, How USA can recover its output gap if it faces an expansionary gap? (200 words) (3 marks)

7.   During the crisis, How USA can recover its output gap if it faces a contractionary gap? (200 words) (3 marks)

Answer 1

(1) The unemployment rate will increase heavily.

(2) The level of consumption will decrease as people tend to save during this depression.

(3) The crisis will reduce the levels of investiment.

(4) The government expenditure will increase.

(5) To recover from the crisis,the government and central bank have to use fiscal policy so to adjust government spending and monetary policy to increase money suply.

(6)Reduce taxes and increase government spending.

(7) use of active monetary and fiscal policy.