Problem Set 2 A country with a civilian population

Problem Set 2

A country with a civilian population of 90,000 (all over age 16) has 70,000 employed and 10,000 unemployed persons. Of the unemployed, 5,000 are frictionally unemployed and another 3,000 are structurally unemployed. On the basis of this data, answer the following questions: (show your work for credit)

• What is the size of the labor force?
• What is the unemployment rate?
• What is the natural rate of unemployment for this country?
• Is this economy in recession or expansion? Explain.

Visit www.bls.gov and search through the tables on unemployment to answer the following questions:

• What is the current national unemployment rate for the United States?
• What is the current national unemployment rate for teenagers?
• What is the current unemployment rate for adult women?

Consider a country with 300 million residents, a labor force of 150 million, and 10 million unemployed. Answer the following questions: (show your work for credit)

• What is the labor force participation rate?
• What is the unemployment rate?
• If 5 million of the unemployed become discouraged and stop looking for work, what is the new unemployment rate?
• Suppose instead that 30 million jobs are created and this attracts 20 million new people into the labor force. What would be the new rates for labor force participation and unemployment?

• In 1991, the Barenaked Ladies released their hit song “If I had a Million Dollars.” How much money would the group need in 2012 to have the same amount of real purchasing power in 2012? Note that the consumer price index in 1991 was 136.2 and in 2012 it was 230. Show your work for credit.

• While rooting through the attic you discover a box of old tax forms. You find that your grandmother made $75 working part-time during December 1964 when the CPI was 31.3. How much would you need to have earned in in January of 2013 to have at least as much real income as your grandmother did in 1964? To determine the CPI for January of 2013 you can visit the Bureau of Labor Statistic website (www.bls.gov). Show your work for credit.

problem set three

Problem Set 3

What is human capital, and how is it different from strictly the quantity of workers available for work? Name three ways to increase a nation’s human capital. Is an increase in the size of the labor force also an increase in the human capital? Explain your answer. The Rule of 70 applies in any growth rate application. Let’s say you have $1000 in savings and you have three alternatives for investing these funds.

• A savings account earning 1% interest per year.
• A U.S. Treasury bond mutual fund earning 3% interest per year.
• A stock market mutual fund earning 8% interest per year.
• How long would it take to double your savings in each of these 3 accounts?

Modern economic theory points to three sources of economic growth. What are these three sources? Give an example of each.

Explain why a nation cannot continue to grow forever just by adding capital. The Solow model focus on how resources affect output. This module/week, you focused on capital.

• Name the other two major categories of resources.
• Draw an aggregate production function with a typical shape; label this function F. (label all curves and axis).
• Draw a second production function that indicates a technological advancement; label this new function F1. (label all curves and axis).