Problem Assignment

Unit 5 Problem Assignment - Due Oct 18, 2019 11:59 PM

Principles of Macroeconomics Sec!on 03G Fall 2019 CO

Problem Assignment Unit 5 1. Given a country’s informa!on below for 2008 and 2009,

calculate the following:

1. The labor force in 2008 and in 2009

2. The unemployment rate in 2008 and in 2009

3. The labor force par!cipa!on rate in 2008 and in 2009

4. The infla!on rate between 2008 and 2009

5. The real interest rate in 2009

2008 2009

Real GDP $2,000,000 2,2000,000

Total Adult Popula!on 190,000 200,000

Employment 100,000 110,000

Unemployment 5,000 6,000

Discouraged Workers 1,000 1,500

Price Index 204 210

Nominal Interest Rate 4% 3%

2. Consider an economy that ini!ally has a labor force of 2000

workers. Of these workers, 1900 are employed and each

works 40 hours per week. 10 units of output are produced by

each hour of labor.

1. What is the total number of hours worked per week in

the economy? What is the total output per week in the

economy? What is the unemployment rate?

2. The economy enters a recession. Employment falls by

4%, and the number of hours per week worked by each

employed worker falls by 2.5%. In addi!on, 0.2% of the

labor force becomes discouraged at the prospect of

finding a job and leaves the labor force. Finally,

suppose that whenever total hours fall by 1%, total

output falls by 1.4%.

A"er all of these changes, what is the size of the labor

force? How many workers are unemployed and what is

the unemployment rate? What is the total output per

week in the economy? (Hint: For the percentage

decreases, subtract the percent fall from 1, and

mul!ply by the original amount to find the new

amount. For example, if employment is 200 and there is

a 5% fall in employment, we have: (1-0.05) x 200 =

190.)

3. Given price index of 200 for 2010 and a price index of 210 for

2011, calculate the infla!on rate between 2010 and 2011. If

the nominal interest rate is 3%, what is the real interest rate?

4. Economic sta!s!cs show that the real interest rate in 1998

was 2%. We know that the price index was 195 in 1997 and

200 in 1998. Calculate the infla!on rate between 1997 and

1998. What was the nominal interest rate?

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Unit 5 Problem Assignment

Due October 18 at 11:59 PM