General Guidelines

This assignment comprises two questions and you must answer all questions. Answers must be explained in full.

All diagrams should be original and not copied from other sources. Diagrams can be drawn electronically or by hand and scanned in.

Submission

Work can either be typed or handwritten. If it is handwritten you should be able to scan it and submit it as a pdf document. If submitting handwritten work, please ensure this is clear and legible. Do not submit work done in pencil.

Referencing

References are not required for standard economic theory as given in the textbooks; however, you should explain any necessary concepts or theories in your own words. If your assignment contains text written by someone else then you must put it in quotes and cite the author, otherwise you will be guilty of plagiarism.

1 When the equilibrium real GDP is below potential GDP, how does the unemployment rate compare with the natural rate? What is the result of this state of affairs that restores the long-run equilibrium?

2. "Ask anyone if he or she has enough money. None ever has enough money, that is, everyone demands more money. Thus theorizing about the demand for money makes no sense because this demand obviously is infinite." Correct and comment on the error in this assertion