Changes in Economic Policies Will Frequently Have an Impact on the Unemployment

question 9

Essay

Changes in economic policies will frequently have an impact on the unemployment rate. Explain whether each of the policy changes described is likely to: (1) affect frictional or structural unemployment and (2) increase or decrease the measured unemployment rate.
a. The government reduces the number of weeks of unemployment insurance that unemployed workers can receive.
b. The government raises the minimum wage.
c. The government increases spending on job-training programs.

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Definitions:

Aggregate Demand

The total demand for all goods and services in an economy at different price levels, including consumption, investment, government spending, and net exports.

Price Level

This refers to the average of current prices across the entire spectrum of goods and services produced in the economy.

Spending Multiplier

The ratio of a change in output (economic activity) to a change in spending, indicating the ripple effect of an initial expenditure through the economy.

Aggregate Demand Curve

A graphical representation of the total demand for goods and services in an economy at various price levels, holding all else constant.