Posted: May 24th, 2016

How could the existence of unemployment benefits or other transfer programs reduce the severity of an economic contraction?

How could the existence of unemployment benefits or other transfer programs reduce the severity of an economic contraction?
2. Refer to the figure below and answer the following questions.
2a. Given that the economy has moved from A to B what would be the appropriate fiscal policy to achieve potential GDP and why?
2b. If fiscal policy is successful at moving the economy from point B to equilibrium at potential GDP, which of the following will occur and why?