ECON HW

Name: _________________________

Score: ______ / ______

Homework 03 - Unemployement

Part 1

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1 Attachments Unemployment Statistics-HW.pdf Unemployment Statistics-HW.xlsx

Questions 1 through 4 in this homework refer to the information in the two attached files

Unemployment Statistics - HW.xlsx and Unemployment Statistics - HW.pdf. Both files

contain the same information, one in Excel the other in pdf. The data in these files are from

the Federal Reserve Bank of St. Louis, FRED database (FRED stands for Federal Reserve

Economic Data) and pertain to 2010.

You include discouraged workers in your calculations only for question 4. Ignore them

for all the other questions.

In 2010 the labor force participation rate was ____ percent.

Enter the answer in percentage form using two decimal places. Do not include the percentage sign. Round the number as in the following examples. You know that SmartSite is quite picky about how you enter the numbers. So, when

in doubt, use Excel to round.

Example:

If the answer is 0.07639, you will enter 7.64.

If the answer is 0.07633, you will enter 7.63.

If the answer is 0.07635, you will enter 7.64.

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2 The overall unemployment rate in 210 was ____ percent

Enter the answer in percentage form using two decimal places. Do not include the percentage sign. Round the number as in the following examples. When in doubt, use Excel to round.

Example:

If the answer is 0.07639, you will enter 7.64.

If the answer is 0.07633, you will enter 7.63.

If the answer is 0.07635, you will enter 7.64.

3 The cyclical rate of unemployment in 2010 was ____ percent.

Enter the answer in percentage form using two decimal places. Do not include the percentage sign. Round the number as in the following examples. When in doubt, use Excel to round.

Example:

If the answer is 0.07639, you will enter 7.64.

If the answer is 0.07633, you will enter 7.63.

If the answer is 0.07635, you will enter 7.64.

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4 The overall unemployment rate that you calculated above excluded discouraged workers. If

you included the discouraged workers in your calculation, the "true" overall unemployment

rate would equal ____ percent.

Enter the answer in percentage form using two decimal places. Do not include the percentage sign. Round the number as in the following examples. When in doubt, use Excel to round.

Example:

If the answer is 0.07639, you will enter 7.64.

If the answer is 0.07633, you will enter 7.63.

If the answer is 0.07635, you will enter 7.64.

5 We have the following information about a small country.

Civilian Population = 300,000

Unemployment Rate = 15.00%

Labor Force Participation Rate = 60%

Calculate the following:

Size of the labor force = ____ Enter the number without a comma or decimal places.

Number of people unemployed = ____ Enter the number without a comma or decimal

places.

Number of people employed = ____ Enter the number without a comma or decimal places.

Employment-Population Ratio = ____ percent Enter the number without a percent sign, but

with two decimal places (for example, 67.51 or 59.00. Round the usual way).

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6 In the previous question the government officials of the country conveniently forgot to

include the discouraged workers in their calculations. After some research you find out that

there were a total of 11,250 discouraged workers in the country. Therefore, you conclude that

the true unemployment rate was ____ percent.

Two decimal places.

7 If any of the following events results in an increase in natural unemployment, enter a 1 in

the box. If it results in an increase in cyclical unemployment, enter a 0 in the box.

Due to globalization, some Sacramento factories relocate to Indonesia ____

Automation results in many workers in auto industry losing their jobs ____

Many new college graduates enter the job market ____

American households begin to worry about their jobs and reduce their spending on goods

and services. This causes a severe recession ____

8 Attachments Labor Market Graph.pdf

Consider the information in the attached file. Currently the overall unempmloyment is ____

percent. Suppose that the stock market crashes and many households experience

reductions in the values of their financial wealth. As a result, they reduce their demands for

goods and services. Because of this, demand for labor decreases by 400 workers. If the real

wage gets stuck at the current level, the overall unemployment rate will equal ____ percent.

Enter the numbers with two decimal places.

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9 Attachments Labor Market Graph - 2.pdf

Consider the labor market information in the attached file. If demand for labor increases by

10 workers and the real wage stays at the current level, the overall unemployment rate will

equal ____ percent.

Enter the number with two decimal places.

10 Consider the labor-market graph in Question 9. In the class we assumed that when demand

for labor is reduced in the short run, the real wage stays the same. This was just to simplify

our analysis. In the real world the real wage is slightly pro-cyclical. What this means is that

the real wage moves somewhat with the real GDP. In a recession, it goes down. In an

expansion, it goes up.

Suppose that demand for labor decreases by 600 workers due toa recession. If the real

wage stays at the current level, ____ people will be naturally unemployed and ____ people

will be cyclically unemployed so that the overall unemployment rate will be ____ percent.

Suppose again that demand for labor decreases by 600 workers due toa recession, but this

time the real wage decreases to 170 units. In that case, ____ people will be naturally

unemployed and ____ people will be cyclically unemployed and the overall unemployment

rate will equal ____ percent.

Enter the numbers without any decimal places.

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