Section 7 and 8
Unemployment rate is the percentage of the unemployed people in the labor force while labor force is the total number of nonmilitary people who are employed or not employed. The labor force consists of people of a working age, probably adults, and therefore students, people who are institutionalized and the retired are not include in this group. Therefore:
Unemployment rate = (No. of the unemployed/ labor force) * 100
Q 7-2
- a) Total population = labor force + adult military + non adult population + institutionalized adults
206.2 M + 1.5M + 48.0M + 3.5M = 259.2 million
- b) Unemployed people = labor force- employed adults
206.2 M – 196.2 M = 10 million
Unemployment rate = No. of unemployed/ labor force
(10 million/206.2 million) * 100 = 4.8%
- c) Labor force participation rate is the ratio between the people in the labor force and the total population of people who should be in the labor force because they are of the acceptable age probably between16 and 65
Therefore, labor participation rate = labor force/ (labor force + non military, non institutionalized adults not in labor force)
206.2m + 40.8m = 247 million
Q 7-4
- a) Friction unemployment rate = 30/ (1000- 20) * 100 = 3.8%
- b) Unemployment rate= 30/ (1000 – 20) * 100 = 3.8%
- c) Friction unemployment rate = (60/ 800) * 100 = 7.5%
- d) Unemployment rate = (60/ 800) * 100 =7.5%
Q 7-6
- a) Unemployment rate = (10/ 200) = 5%
- b) Average duration of unemployment = 30 days/ 360 days =0.083
- c) Average duration of unemployment = 60 days/ 360 days =0.167
- d) Unemployment rate = (20/ 200) = 1%
Q 7-8
- a) Price index = (Price for 2006/ Price for 2008) * 100
($2100/ $2000) * 100 = 105
Q 7-10
Anticipated rate of inflation = nominal rate of interest – real rate of interest
6% – 4% = 2%
Q 7- 12
- a) Nominal rate – inflation rate = Real interest rate
7% – 5% = 2%
- b) Anticipated value of price index the following year.
100 = 7%
105 =?
(105 * 7)/ 100 = 7.35%
Q 7-14
- a) Contraction Y
- b) Peak U
- c) Trough X
- d) Expansion S
- e) Recession Y
Q 8-2
- Contribution to GDP
$200 + $225 + $50 + $245 = $720
- $720 + $500 + $50 = $1,270
- $1,270 + $1,200 = $2,470
Q8-4
Q8-6
- no
- yes
- yes
- no
- yes
- yes
- yes
- yes
- yes
Q8-8
- There is no change in the GDP since there were no effects on the aggregate production or on market prices of final gods and services.
- The GDP goes down since there is a reduction on government spending.
- The GDP decreases due to consumers spending less.
Q8-10
- Nominal GDP
2007
(2*15 + 200*10 + 40*5 + 3*10 + 1*40) =$ 2300
2011
(4*20+250*10+50*4+4*3+2*20)= $ 2,832
- b) Real GDP
2007 $2300 same as nominal GDP since it is the base year
2011 (4*15 + 250*10+ 50*5 + 4*10 + 2*40) =$ 2930
(2930 – 2300) = $630
Q8-12
- Nominal GDP
2009
(1000*10+6*3000+100*500+1*10000) = $43,000
2010
(800*15+11*1000+150*300+2*10000)=$172,600
- Real GDP
2009
(800*10+11*3000+150*500+2*1000)= $118,000
$172,600-$118,000 =$54,600
2010
$172,600 same as nominal GDP
Q8-14
$5 million +$15m + $3m =$23m
Using the expenditure approach, the GDP rose with $23m since this is the amount that was spent.
Q8-16
- The base year is 2006.this is because this is where the nominal GDP and the real GDP are the same.
- Since the base year the country has experienced inflation in years 2007, 2008 and 2009. This is so because the real GDP is less than the nominal GDP meaning that there has been n inflation that has caused the real GDP to be less. There is deflation in years before the base year because the real GDP is less than the nominal GDP.
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