Question
State whether the following are true, false or uncertain, and provide reasons for your answers. Use appropriate diagrams and/or equations, where relevant, to aid your
State whether the following are true, false or uncertain, and provide reasons for your answers. Use appropriate diagrams and/or equations, where relevant, to aid your explanations:
a) Policymakers should focus solely on the statistically derived relationship between GDP growth rates and changes in the unemployment rate (Okun's law) when determining what policies to implement to reduce the level of unemployment in an economy.
b) In an economy operating below its full capacity utilization rate, any increases in government spending will end up 'crowding out' private sector investment.
c) An increase in the savings rate of all the citizens of a country leads to a massive increase in the value of aggregate savings for the entire economy.
d) The main 'winners' from higher than expected inflation would be savers and those on fixed-incomes.
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