Answer the following questions thoroughly using the textbook linked below:
https://core-econ.org/the-economy/book/text/0-3-contents.html
1. What is the paradox of thrift? How does this lead to poor macroeconomic outcomes (you
should address the multiplier here)? What should the government do in this situation?
2. Economists track 3 types of unemployment (frictional, structural, and cyclical). Explain
each one and what policy makers should consider in attempting to minimize each.
3. Suppose the central bank lowers the interest rate. Explain how this feeds through the
four transmission mechanisms (market interest rates, asset prices, expectations, and
exhcange rates) to increase aggregate demand.
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