Unit 2 Review FRQs - Economic Indicators and the Business Cycle PRQ #1 The unemployment rate is an important indicator of the health of the United States economy. A. Assume that with the economy at full employment, the government implements an expansionary fiscal policy. How does the actual unemployment rate at the new short-run equilibrium compare with the natural rate of unemployment? B. Assume that a significant number of workers are involuntarily changed from fulltime to parttime employment. Explain how this will affect the number of people who are officially classified as unemployed. C. Assume that the government reduces the level of unemployment compensation. i. Explain how this affects the natural rate of unemployment. ii. Explain how this affects the longrun Phillips curve. r FRQ# 2