Problem 1: Stormland is a country that is heading toward recession. It needs to address an issue with structural unemployment.
Identify the causes of structural unemployment and determine which factors are contributing to its rise.
Problem 2: Assume the government of Stormland will aggressively try to solve its structural unemployment issue with expansionary monetary and fiscal policy, detail how this policy would look in the following bullet points:
A. Draw one fully labeled AD/AS diagram, based on the Keynesian model, for what the nation hopes will happen.
B. What will happen in the short run? What will happen in the long run?
C. Then draw a second fully labeled AD/AS diagram, based on the neoclassical model, for what is more likely to happen.
D. What will happen in the short run? What will happen in the long run?
E. What factors would have to be in place for the nation to solve the issue with expansionary fiscal policy?