NAIRU + reasons for differences (1 Viewer)

[MissyL]

What points did every one make on these two questions?

Nervous for this. For NAIRU i did reducing u/e further would lead to higher inflation => higher uncertainty in the economy => ultimately undermines EG

Reasons for difference:
-corruption
-geographical location of natural resources

 

[malcolm21]

Didn't the nairu question ask what should be done to fix the problem? I said increasing aggregate demand on its own just increases inflation like u said and only lowers unemployment in the short term, then stuff about mer if i remember correctly.

i wrote economic growth-> more government revenue-> more spenidng on public infrastructure/welfare + corruption

 

[MissyL]

wasnt it like the implications of economic policy on reducing U/E after achieving NAIRU? if not then im fucked

 

[sy37]

I wrote factor endowments, and used AU as an example (land resource)

I wrote political insitutions (corruption) and used Kenya as an example (unaccounted government expenditure)

pretty good exam if you keep up with the news imo

 

[Ekman]

I said differing level of expenditure on factors of HDI, for example on healthcare and education, and also said differing levels of technology advancements, and capital formation and explained the digital divide.

 

[My two cents]

I believe it said implications of going below NAIRU so I said increased cost push inflation as firms have to higher those who are structurally UE and Frictionally UE: these have a higher cost than Cyclical as they have to be retrained /incentive to work. Also decrease UE below NAIRU = Increased Demand Inflation as Consumption Increases.

 

[MissyL]

yeah i had the same interpretation as u (prolly a lot of kids read it as that too). i reckon it was a pretty poorly phrased question, but that is not only to say just cos i misread it lol.

 

[MissyL]

I wrote factor endowments, and used AU as an example (land resource)

I wrote political insitutions (corruption) and used Kenya as an example (unaccounted government expenditure)

pretty good exam if you keep up with the news imo

that is true, in which case i bet everyone does keep up with the news cos of the trending thingo on fb. thank god for that lol

 

[xetamine]

I guess some people might have interpreted the question as reasons for differences. I personally think that if you read it correctly, it is quite clearly stating how well typical policies will do is a country is at NAIRU.

The BoS may decide to give both interpretations full marks, or it may cap marks to 3 if you had the incorrect interpretation.

 

[User name]

i thought the nairu was asking how to reduce unemployment when it was already at the nairu? meaning how to reduce structural unemployment (because since the economy is at the nairu, there is no cyclical unemployment)

 

[FlameLash]

i thought the nairu was asking how to reduce unemployment when it was already at the nairu? meaning how to reduce structural unemployment (because since the economy is at the nairu, there is no cyclical unemployment)

Yeah that's what I thought too at the time, but you have to remember that just because the economy is running at the NAIRU, it doesn't mean that there is no cyclical unemployment necessarily. It just means the economy is at the same rate of unemployment as the NAIRU, but doesn't exactly mean that it is due to the elimination of cyclical unemployment as that is not explicitly said.

 

[Ekman]

I just read this paragraph from Dixon on page 188:

The concept of the NAIRU has important implications for economic policy. It suggests that policies to encourage economic growth and reduce unemployment will be worthwhile up to a point, but beyond that, these policies will only create inflation. The NAIRU can, however, be reduced over the long term through policies that improve the skills of unemployed people or address other hurdles to their participation in work, such as helping employers to make their workplace suitable for people with a disability.

Maybe this might help?

 

[HecticSandWitch]

I just read this paragraph from Dixon on page 188:

The concept of the NAIRU has important implications for economic policy. It suggests that policies to encourage economic growth and reduce unemployment will be worthwhile up to a point, but beyond that, these policies will only create inflation. The NAIRU can, however, be reduced over the long term through policies that improve the skills of unemployed people or address other hurdles to their participation in work, such as helping employers to make their workplace suitable for people with a disability.

Maybe this might help?

This is what the question was asking. It wanted you to say that macroeconomic policy will only go so far and that microeconomic reform is needed to lower the level of structural unemployment without inflationary growth.

 

[malcolm21]

Yeah that's what I thought too at the time, but you have to remember that just because the economy is running at the NAIRU, it doesn't mean that there is no cyclical unemployment necessarily. It just means the economy is at the same rate of unemployment as the NAIRU, but doesn't exactly mean that it is due to the elimination of cyclical unemployment as that is not explicitly said.

actually the definition of the nairu is the rate of unemployment rate when there is exactly 0 cyclical unemployment?