## Q2a is the application of NAIRU to compare with actual U-rate to figure out the cause ofinflation. Similar Q you may find in one of those HW Qs

Review of MT Exam Qs
ECON102_Online
N. Aman
Q1a, you need to understand the conceptual difference between actual unemployment rate, full employment and unemployment rate at full employment. Then you will also need to relate that to the concept of NAIRU (what types of unemployment constitute NAIRU) and how many types of unemployment with explanation as sources of total unemployment types. That is the first part. Second part is to apply that concept in the current actual U-rate (use the u-rate for the month of Sep 2020 published in the labor department website www.bls.gov).
Q2a is the application of NAIRU to compare with actual U-rate to figure out the cause of inflation. Similar Q you may find in one of those HW Qs.
Q2b, you are asked to illustrate the explanation you would have in Q2a answer in a hypothetical diagram of macro model.
Q3.Use the equation for labor productivity = RGDP/Hours of Labor
then figure out if RGDP increases at a higher rate than the hours of labor worked. If so, labor productivity might have increased.
Based on that concept, in reference to one of your HW Qs, use this logic of the equation: % Change in Labor productivity + % change in Hours of labor worked = % change in output (RGDP) growth Q4, a. this Q s related to multiplier effect.
There are two kinds of Keynesian multiplier: Tax multiplier and Expenditure multiplier
Tax multiplier = -MPC/(1-MPC)
Expenditure multiplier = 1/MPC, MPC = Marginal propensity to consume
1-MPC = MPS marginal propensity to save; So, the GDP increases or decreases when Tax or expenditure policy is changed by the Fiscal policy of the Govt. Tax and G (govt exp) are the two fiscal policy tools to control inflation or combat recession.
So, the effect of change in tax would be Delta Y = tax multiplier *delta T (raising taxes would be positive tax, decreasing tax would be negative tax).
The effect of change in govt spending would be like Delta Y = Expenditure multiplier *
Delta G.
Increasing G would be +ve G, and decreasing G would be negative G to multiply by the multiplier.
You use the concept of expenditure multiplier only to address the Q #4a. No need to use tax multiplier for this particular question.
Q4b, use the macro model for its component of export-import to explain what you think.
You also need to figure out the impact of tariff on prices of the goods and services imported from China. Who pays for the increasing the price level? You may also use demand and supply concept to explain. No need to draw graph to illustrate.
Q5. Similar to HW Qs in WK3 HW; Also, examples of numerical estimates in textbook chapter 6 and WK4 HWs.
Q6. Similar examples in textbook Chapter 8
Q7. Similar example in textbook chapter 8. In this case you use the concept of tax multiplier explained under Q4a above.
I hope this review will help guide you to the right place to do well in the exam. Best of luck and feel free to email me with any other Qs.

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