Imagine that it is year 2022 and our economy has been enduring a severe recession due to the current crisis. But then the U3 unemployment rate begins to decline.
1. Imagine that it is year 2022 and our economy has been enduring a severe recession due to the current crisis. But then the U3 unemployment rate begins to decline. From this information alone, what should we conclude about the near-term outlook for the economy? Why? (To answer this question you will want to explain about the U3 unemployment rate and what could lead to this decline.)
2. Product X is made in a perfectly competitive industry that is initially in long-run equilibrium with a market price of $10 per unit. Suddenly (as has been the case with face masks and hand sanitizer) the demand for product X rises permanently.
Trace out the immediate short-run and ultimate long-run consequences for these items: price of product X market output of product X output of a typical company producing product X the profitability of companies in the market Explain why these items change in the way they do. (We are not given enough information to figure out exact amounts, just the direction of change.)
