4. Putting it all together. Using this data, answer the following questions. You
ID: 1161001 • Letter: 4
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4. Putting it all together. Using this data, answer the following questions. You should consider 2013 to be your base year. a. Fill in each of the 15 blanks shown below: Inflation Population Labor Force Employed UnepoyedemploymentLabor Force Year CPI 2013 160 2014 | 165 | 3.1% 2015 | 170| 3.0% | 2016 | 177 | 4.1% Participation Rate 69.3% 65.4% 65.3% 62.2% Rate Rate 137,73395,450 90,325 5125 52,944 100,02395,611 4412 160,145 104,55997,122 7437 174,006 | 5.4% 4.4% 7.1% 6.9% | 108,250 | 100,830 | 7420 Using an AD/AS Model, show what you believe to have occurred to cause the outcomes you found in the chart above. (In other words, based upon the information given, what would cause the inflation? What would cause the unemployment outcomes?) b.Explanation / Answer
4.
B
There is an increase in population on a year on year basis, that has caused aggregate demand to increase and it has caused aggregate demand to shift to the right. Though, the aggregate supply is not increasing in the equal proportion. It is proved by the rising unemployment rate in the economy. It is happening when the labor force participation rate is decreasing. It has caused inadequate supply of goods and services in the economy. As a result, more people are chasing fewer goods and price level in the economy rises. It leads to the rising inflation in the economy, vindicated by the inflate rate data.
Besides, despite increasing population, and decreasing labor force participation rate, there is a rise in the unemployment rate with a slight dip in 2014. It means that firms are not building adequate capabilities, capital stock and not producing goods sufficiently to cater the aggregate demand. It leads to less than required creation of employment, causing a rise in unemployment rate.
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