Why will investment affect both actual (short-term) growth and the long-term growth in potential output? What will be the implications if these two effects differ in magnitude?
Answer to relevant QuestionsAt what phase of the business cycle is the average duration of unemployment likely to be the highest? Explain.Imagine that you had to determine whether a particular period of inflation was demand-pull, or cost-push, or a combination of the two. What information would you require in order to conduct your analysis?Criticise the use of increasing government expenditure as a means of reducing unemployment.How can the interaction of the multiplier and the accelerator explain cyclical fluctuations in national income?Why might the relationship between the demand for money and the rate of interest be an unstable one?
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