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Specification:
Some current statistics about US monetary policy and unemployment:
The current rate of unemployment in the US is 4.4 per cent, the third lowest in the G7 behind Japan (2.56 per cent) and Germany (3.41 per cent)
The US inflation rate of 3 per cent is close to its target rate, but the second-highest in the G7.
Unemployment is measured by the US Bureau of Labor Statistics
US President Donald Trump has long campaigned for the Fed to cut rates, arguing that high interest rates act as a barrier to jobs and investment. But the Federal Reserve is independent and must consider a range of factors when deciding to cut rates,
Read the article and then answer the questions:
US adds 119,000 jobs in September but unemployment hits four-year peak
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Define the term unemployment [2]
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Outline the current trend in US unemployment [2]
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Using an aggregate demand and supply diagram, explain the impact of the US central (Federal Reserve) decreasing its base interest rate on US unemployment [4]
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Explain two other macroeconomic factors that the Federal Reserve might consider when deciding whether to decrease its base interest rate [4]
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Discuss the effectiveness of decreasing interest rates to reduce unemployment [15]
Mark Johnson, InThinking/thinkIB