What are the different policy tools for dealing with cyclical unemployment?
By expanding monetary and fiscal policies and depreciating the exchange rate, the policy makers can deal with cyclical unemployment.
It is the component of overall unemployment that results directly from cycles of economic upturn and downturn. It generally rises during recessions and falls during economic expansions.
a) Policy makers should focus on expanding output, which is most effectively achieved by stimulating demand. The good of expansionary monetary and fiscal policies is to boost aggregate demand by cutting interest rates and taxes.
b) Policy makers may also depreciate the exchange rate in order to boost export demand or introduce specific legislation and initiative that target particular areas of the economy.
Retrieve the following data from The World Bank database (http://databank.worldbank.org/data/ home.aspx) for India, Spain, and South Africa for the most recent year available:
• GDP in constant international dollars or PPP
• GDP per person in constant international dollars
• Mortality rate, infant (per 1,000 live births)
• Health expenditure per capita (current U.S. dollars)
• Life expectancy at birth, total (years)
Retrieve the unemployment data from The World Bank database (http://databank.worldbank.org/data/ home.aspx) for India, Spain, and South Africa for 2011-2015. Prepare a chart that compares India, Spain, and South Africa based on the data. Describe the key differences between the countries. Rank these countries as high-, medium-, and low-income countries. Explain what is surprising or expected about this data. How did the Great Recession impact these countries?
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