# labor force

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?