1.What are the consequences of long term unemployment? 2.Should the government help the unemployed? What role do you think the government has in our economy? 3.What should individuals facing long term unemployment do to deal with this situation? Solution 1) the rise in the incidence of longterm unemployment has been \"caused\" by a collapse of outflow rates at all durations of unemployment; while the longterm unemployed do leave unemployment at a slower rate than the shortterm unemployed, this has always been the case and their relative outflow rate has not fallen over time; there is no evidence that, for a given level of unemployment, the incidence of longterm unemployment has been ratcheting up over time; once one controls for heterogeneity of the unemployed, there is little evidence of outflow rates that decline over a spell of unemployment. While these findings suggest that longterm unemployment is not a problem independent of unemployment itself, one should recognize that the experience of longterm unemployment is a horrid one for those unfortunate enough to experience it 2) the Great Depression of the 1930s, recessions -- periods of slow economic growth and highunemployment -- were viewed as the greatest of economic threats. When the danger of recession appeared most serious, government sought to strengthen theeconomy by spending heavily itself or cuttingtaxes so that consumers would spend more, and by fostering rapid growth in the money supply, which also encouraged more spending. In the 1970s, major price increases, particularly for energy, created a strong fear of inflation -- increases in the overall level of prices. As a result, government leaders came to concentrate more on controlling inflation than on combating recession by limiting spending, resisting tax cuts, and reining in growth in the money supply. Ideas about the best tools for stabilizing theeconomy changed substantially between the 1960s and the 1990s. In the 1960s, government had great faith in fiscal policy -- manipulation of government revenues to influence the economy. Since spending andtaxes are controlled by the president and the Congress, these elected officials played a leading role in directing the economy 3) dealing with long term .

1. 1.What are the consequences of long term unemployment?
2.Should the government help the unemployed? What role do you think the government has in
our economy?
3.What should individuals facing long term unemployment do to deal with this situation?
Solution
1) the rise in the incidence of longterm unemployment has been "caused" by a collapse of
outflow rates at all durations of unemployment; while the longterm unemployed do leave
unemployment at a slower rate than the shortterm unemployed, this has always been the case and
their relative outflow rate has not fallen over time; there is no evidence that, for a given level of
unemployment, the incidence of longterm unemployment has been ratcheting up over time; once
one controls for heterogeneity of the unemployed, there is little evidence of outflow rates that
decline over a spell of unemployment. While these findings suggest that longterm unemployment
is not a problem independent of unemployment itself, one should recognize that the experience
of longterm unemployment is a horrid one for those unfortunate enough to experience it
2) the Great Depression of the 1930s, recessions -- periods of slow economic growth and
highunemployment -- were viewed as the greatest of economic threats. When the danger of
recession appeared most serious, government sought to strengthen theeconomy by spending
heavily itself or cuttingtaxes so that consumers would spend more, and by fostering rapid growth
in the money supply, which also encouraged more spending. In the 1970s, major price increases,
particularly for energy, created a strong fear of inflation -- increases in the overall level of prices.
As a result, government leaders came to concentrate more on controlling inflation than on
combating recession by limiting spending, resisting tax cuts, and reining in growth in the money
supply.
Ideas about the best tools for stabilizing theeconomy changed substantially between the 1960s
and the 1990s. In the 1960s, government had great faith in fiscal policy -- manipulation of
government revenues to influence the economy. Since spending andtaxes are controlled by the
president and the Congress, these elected officials played a leading role in directing the economy
3) dealing with long term