Record unemployment stats
Chapter 16 is a continuation of monetary policy analysis. Here we will be looking at the demand for money (p.350) and the supply of money (set by the Fed, thus a vertical line). When the two lines cross you will see the level of interest rates – figure 16-7. If the Fed would like to decrease interest rates (easy money, expansionary monetary policy to alleviate a recession), they would increase the money supply. See figure 16-3 and 16-4. In the videotaped lecture you will learn about the 3 tools that the Fed uses to change money supply – of which the most common is “open market operations”.
Another analysis of the impact that a change in money supply will have on GDP is the Quantity Theory of Money (MV=PQ—where Q= real GDP). We will keep velocity constant, so if we increase M then either P or Q or both PQ will increase. If we are at full employment, then an increase in M will only increase P (Q cannot increase since you are at full employment). If you are far from full employment, then an increase in M will increase Q without increasing P (surplus of resources so prices do not increase). When you are getting closer to full employment then shortages of resources will develop, and P will increase as well as Q since you are not at full employment yet.
Some economists advocate a hands off monetary policy which is meant to rely on the free market system. Since we would like to see the economy grow at about 3% then we should increase the money supply also at 3% to keep interest rates constant. If the economy is overheating and growth is, let’s say at 5%, then there would be an excessive demand for money and interest rates will increase which would reduce the borrowing given that it becomes more expensive. The opposite will happen if growth is too low (let’s say 2%), then interest rates will decline and more borrowing will take place and then growth will increase.
This week’s statistical data for unemployment is very important since it is the lowest unemployment rate since 1969!! You should keep a copy of an article analyzing the number of jobs created and the unemployment rate for the month of April. Are those number high/low. significant etc….You should check the “Additional Assignments” for this week’s submission.
You should look for an article which will analyze the data (what are the reasons why our unemployment is so low, look at the number of jobs created and discuss if this is low or high compared to previous times, look at discouraged workers, what industries contributed to the reduction in the unemployment rate etc…). You will need to give a live link to the article. Do not exceed 250 words.
"You need a similar assignment done from scratch? Our qualified writers will help you with a guaranteed AI-free & plagiarism-free A+ quality paper, Confidentiality, Timely delivery & Livechat/phone Support.
Discount Code: CIPD30
Click ORDER NOW..
