Circular flow model, GDP, Business Cycles and Unemployment
1. Using the basic circular flow model, explain why the value of businesses' output of goods and services equals the income of households.
Suppose the U.S. nominal GDP increases form one year to the next year. Can you conclude that these figures present a misleading measure of .com/education/social-economic-status">economic growth? What alternative method would provide a more accurate measure of the rate of growth?
2. What is the basic cause of the .com/business">business cycle?
How does structural .com/economics/unemployment">unemployment differ from cyclical unemployment?