1. The Current State of the Economy and Unemployment 

Imagine a scenario where there is a decline in aggregate demand.  Identify which part of the business cycle is part of a decline in aggregate demand.  Gross Domestic Product (GDP) measures the amount of new production. A change in the amount of new production affects employment.  Describe what would happen to GDP, the unemployment rate and the inflation rate if there is a decline in aggregate demand.

Reference: Chapter 6, section 6.3: Aggregate Equilibrium and Changes in Equilibrium.

  1. Who Benefits and Who Loses from Inflation?

Inflation is an important policy issue because it causes a redistribution of income and wealth, and discourages saving and investment.  Discuss how inflation affects borrowers and lenders, asset prices, and households on fixed incomes.

Reference: Chapter 4, section 4.3: Gainers and Losers from Inflation.

Amacher, R., Pate, J., (2012). Principles of Macroeconomics. San Diego, California: Bridgepoint Education, Inc.

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