Extended Essays 2021

approximately $3 trillion and $900 billion. It provides a small amount of funding costs and

support for the domestic firms in the United States, thus shifting aggregated demand to the

right, slowly reducing its price level, and ultimately achieving the purpose of real GDP

growth. Therefore, released the amount of funds for the long term and many rounds can

ensure the maximum efficiency of funds and avoid the generation of deadweight loss. Hence

preventing a significant and rapid decrease in the price level and effectively avoiding

inflation, the considerable inflation in 2020 is shown in Table 2.

3.4 Unemployment rate

Furthermore, low unemployment is often seen as a positive sign of the economy. However,

extremely low unemployment may negatively affect inflation and productivity decline

(Hankin, 2020). Therefore, we can evaluate whether the monetary policy adopted in 2020 has

been overused based on the changes in the unemployment rate. If it is too high or normal, the

policy does not overuse. If the unemployment rate is much lower than it usually is, the

monetary policy is overused

Therefore, during the economic crisis in 2020, the decrease in the level of expenditure and

output of the U.S. economy as a whole led to the shortage of total demand, which eventually

led to cyclical unemployment. According to Okun’s law (Furhmann, 2020), for every 1%

increase in the unemployment rate, the real GDP will decrease by about 2%. Therefore, the

high unemployment rate will lead to a sharp drop in the GDP. The unemployment rate

reached the peak of the economic crisis by June 2020. Combined with the GDP changes in

Table 4, the GDP also reached the lowest value in that quarter.

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