Hong Kong Baptist University

ECON1006 Principles of Economics II (Macroeconomics)

Semester 2, 2022/23
Assignment 1

Name: Tang Fu San

Student ID: 22219633
Section: 3

Q1
The expenditure approach is measured in terms of the amount of spending by the ultimate
purchasers of output. GDP measures the output produced within a nation. Gross National
Product or Gross National Income measures the output produced by domestic factors of
production. As exports are goods and services produced domestically but purchased by
foreign countries while imports are goods and services produced in foreign countries but
purchased domestically which is foreign production, not domestic product.

Q2
The natural rate of unemployment is the minimum rate of unemployment of the economy
with a stable inflation rate. It makes sense to define full employment to occur when the
unemployment rate equals the natural rate of unemployment, instead of when the
unemployment rate equals zero. As firms would hire the people who have better work skills
or abilities with a high wage. Also, the prices of products would raise in order to make more
profits. This would cause inflation. Therefore, workers want to get jobs for higher wages and
cause shifts of labor and unemployment.

Q3
Frictional unemployment is caused by those people who are voluntarily seeking for a new
job. It is suggested that he or she find the job that is meaningful or better than the previous
job. Structural unemployment is caused by the changes in economic structure or
improvements in technology. It is suggested that people in this unemployment develop
professional skillset, looking for the market trending of jobs and build the professtional
network. Cyclical unemployment is caused by job losing during declines in an economy. It is
suggested that they go for a part-time job or stay until the recession is over.