Question: Discuss the differences between unemployment and underemployment and give examples of each. Which do you think is a more serious "problem" for the economy? How might underemployment be addressed through government policy?
Discussion Checklist:
- What are the key tools of fiscal policy and monetary policy
- Why might each of these policies not be effective in reducing high levels of unemployment
- Why might changes in unemployment be a lagging indicator in an economic recovery
- Discuss the possibility that monetary and fiscal policy actions might actually destabilize the economy and reductions in unemployment
What factors might cause the marginal propensity to consume to change? If the MPC increases from 0.50 to 0.75, what happens to consumption and ultimately GDP when household income rises? What do you think happened to MPC after the last recession? Explain.