1. Assume the following data for a country: total population, 500; population under 16 years of age or institutionalized, 120; not in labor force, 150; unemployed, 23; part-time workers looking for full-time jobs, 10.
Explain and show how the results were obtained for full credit.
- What is the size of the labor force?
- What is the official unemployment rate?
2. Suppose that the natural rate of unemployment in a particular year is 5 percent and the actual rate of unemployment is 9 percent. Use Okun’s law to determine the size of the GDP gap in percentage-point terms. If the potential GDP is $500 billion in that year:
Explain and show how the results were obtained for full credit.
- How much output is being forgone because of cyclical unemployment?
3. If the CPI was 110 last year and is 121 this year:
Explain and show how the results were obtained for full credit.
- what is this year’s rate of inflation?
In contrast, suppose that the CPI was 110 last year and is 108 this year.
- What is this year’s rate of inflation?
- What term do economists use to describe this second outcome?
copy and paste or type in your responses in text.
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