Suppose we have an economy for which G = 300, T = 240, S = 80, I = 45, and imports = 40. Exports must be

Which of the following explains the cause of the change in the unemployment rate at the end of a recession?

A) Firms are hesitant to rehire laid off workers as they continue to operate below capacity. B) Discouraged workers leave the labor force, and this makes the unemployment rate rise. C) Discouraged workers return to the labor force, and this makes the unemployment rate fall. D) Firms rapidly hire new workers at the first sign of an increase in demand for their goods.

If the economy is currently in equilibrium at a level of GDP that is above potential GDP, which of the following would move the economy back to potential GDP?

A) a decrease in interest rates B) a decrease in wealth C) a decrease in the value of the dollar relative to other currencies D) an increase in business confidence