Question 7 (2 Viewers)

[runnable]

I believe its A. It was clear cut asking us to know that growth cannot increase employment at NAIRU.

 

[runnable]

From Tim Dixon's book on NAIRU.

"Therefore, making the economy grow faster by increasing the level of demand through macro policies is futile once the NAIRU is reached. It will only lead to higher inflation."

Pretty sure it does not say NAIRU can go under through growth.

 

[Garygaz]

Yea true, different books address it differently, it will be interesting to see what the BOS puts down for it.

 

[cs01001]

Any possibility of A/C both right?

 

[whoisurdaddy]

Its C. I bet my soul on it.

 

[runnable]

Guess you just lost your soul.

Because we only learn the NAIRU and the one golden rule of NAIRU is that it cannot be reduced through growth.

 

[purplecupcake]

so im going to add my 2c worth to this discussion,

i TOO put c

 

[frieda]

You know Long run phillips curve is not quite just phillips curve.

Its full name is Friedman-phelps Expecations Augmented Phillips curve which explains why what happens when AD is increased at NAIRU. Initial impact would be a decrease in U/E and increase in inflation, over the long term the U/E will return back to the NAIRU.

Go read ur econ text books if you don't get this. A is WRONG.

THANK YOU

 

[runnable]

Lol novices. Come back when the answers come out yea?

 

[aussie-boy]

yeah the C camp has much much more evidence than the A camp
its clearly C

 

[Garygaz]

Guess you just lost your soul.

Because we only learn the NAIRU and the one golden rule of NAIRU is that it cannot be reduced through growth.

Actually after much deliberation, I've come to think you are right.

The long-run phillips curve is not taught under the HSC syllabus. At the end of Dixon's book, it says in appendix: b, where there is the information relating to this, that The analysis in this section is not required under the HSC Economics syllabus.

Hence, using only the HSC requirements on NAIRU and natural rate of employment, the basic analysis (and hence the one that is meant to be used in the HSC) is that the natural level of unemployment is unaffected by an increase in aggregate demand.

 

[plak]

And this is why Economics m/c is the hardest!. I put C lol. We'll know once the answers come out

 

[whoisurdaddy]

Guess you just lost your soul.

Because we only learn the NAIRU and the one golden rule of NAIRU is that it cannot be reduced through growth.

Owwww....

 

[shadyhaze]

think about the senario
at full employment, there is no cyclical unemployment
seasonal and frictional have no bearing
you cant just make ppl who lack skills (structural) do extra jobs
hardcore unemployed are unemployable

so if you increase growth, hence demand more from labour, at full employment aggregate labour demanded = aggregate labour suplied thus if you try to increase output through employing ppl without skills, hardcore what will happen? nothing, thus unemployment rate wont decrease

but at the same time increasing growth, gives incentive for ppl to work, reducing the discouraged workers, who then go and seek jobs, increasing the number of ppl who are actively seeking employment, hence increasing unemployment

thus answer is a

 

[poisonives]

think about the senario
at full employment, there is no cyclical unemployment
seasonal and frictional have no bearing
you cant just make ppl who lack skills (structural) do extra jobs
hardcore unemployed are unemployable

so if you increase growth, hence demand more from labour, at full employment aggregate labour demanded = aggregate labour suplied thus if you try to increase output through employing ppl without skills, hardcore what will happen? nothing, thus unemployment rate wont decrease

but at the same time increasing growth, gives incentive for ppl to work, reducing the discouraged workers, who then go and seek jobs, increasing the number of ppl who are actively seeking employment, hence increasing unemployment

thus answer is a

great post

 

[Geohood]

The fact of the matter is... they shouldn't make us think that hard in MC!!!!

 

[Terlob]

The fact of the matter is... they shouldn't make us think that hard in MC!!!!

Its a lot of thinking for one mark

 

[shakky15]

With Dixon's book.

Read up on Causes of Unemployment, Rising participation rates. Clearly states it.

your giving me the shits. stop telling us to 'read up'.

howabout YOU read up on page 171, the page you tell us to have a look at.

"Once the natural rate is reached, any further cuts in wages or stimulus to aggregate demand will not lead to permanent reductions in the rate of unemployment".

Tim Riley:

"thenatural rate of unemployment is also referred to as the NAIRU as it is at that level of unemployment in the labour market that remains if inflation is not increasing or accelerating in the economy".

ie - its not a concrete barrier that cannot be penetrated. its just that if unemployment DOES go under the NAIRU (and it CAN), the result is high inflation. also, its just for the short term as unemployment would quickly increase back above the NAIRU.

besides, howabout some common sense? our unemployment rate has been below the NAIRU for months now.

so i put (c).

 

[shadyhaze]

read my post and tell my why a is wrong, and economics is theoretical remember tht

 

[shakky15]

think about the senario
at full employment, there is no cyclical unemployment
seasonal and frictional have no bearing
you cant just make ppl who lack skills (structural) do extra jobs
hardcore unemployed are unemployable

so if you increase growth, hence demand more from labour, at full employment aggregate labour demanded = aggregate labour suplied thus if you try to increase output through employing ppl without skills, hardcore what will happen? nothing, thus unemployment rate wont decrease

but at the same time increasing growth, gives incentive for ppl to work, reducing the discouraged workers, who then go and seek jobs, increasing the number of ppl who are actively seeking employment, hence increasing unemployment

thus answer is a

why doesnt seasonal unemployment have any beearing? im sure they can work in other jobs too. and i dont think hard core unemployment is coz they are unemployable (i could be wrong) i think its coz they are not desirable.

look, in all honesty i think there are arguments for both a and c.. id say the most correct answer is none of them as backcountrysnow suggested. unemployment shoouldnt change, and inflation would simply go up.

im just waiting for the answers to be published by the BOS now.