As the Federal Reserve sharply raises rates in the face if substantial inflationary pressures, economists are trying to gauge the extent to which the U.S. labor market is slowing. First, how might you try to measure labor market slack? Second, across the business cycle, describe how the gap between whatever is true unemployment and a notion of “full” employment generally relates to inflationary pressures. Finally, relate this gap to the economy’s overall ‘output gap’ (actual GDP vs. potential GDP).
As the Federal Reserve sharply raises rates in the face if substantial inflationary pressures, economists are trying to gauge the extent to which the U.S. labor market is slowing. First, how might you try to measure labor market slack? Second, across the business cycle, describe how the gap between whatever is true unemployment and a notion of “full” employment generally relates to inflationary pressures. Finally, relate this gap to the economy’s overall ‘output gap’ (actual GDP vs. potential GDP).
Chapter9: Classical Macro Economics And The Self Regulating Economy
Section: Chapter Questions
Problem 8QP
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As the Federal Reserve sharply raises rates in the face if substantial inflationary pressures, economists are trying to gauge the extent to which the U.S. labor market is slowing.
First, how might you try to measure labor market slack?
Second, across the business cycle, describe how the gap between whatever is true
Finally, relate this gap to the economy’s overall ‘output gap’ (actual
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