Chapter 26: Problems 2, 3, 4 and 6 on page XXXXXXXXXXAssume the following data for a country: total population, 500;population under 16 years of age or institutionalized, 120; not in labor...

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Answer To: Chapter 26: Problems 2, 3, 4 and 6 on page XXXXXXXXXXAssume the following data for a country: total...

Robert answered on Dec 21 2021
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Chapter 26: Problems 2, 3, 4 and 6 on page 545.
2. 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. What is the size of the labor force? = 230
Those above 16=500-120 =380
Those not in labor force=150
Those in labor force= 380-150=230
What is the official unemployment rate? = 23/230= 10%
3. 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, how much output is being forgone because of cyclical unemployment?
Gap in unemployment = 9-5 =4%
Loss of GDP / GDP gap = 2*4 =8%
Potential GDp loss=8% of 500 =40 billion
4. If the CPI was 110 last year and is 121 this year, what is this year's rate of inflation?
=(121-110)/110 = 10%
In contrast, suppose that the CPI was 110 last year and is 108 this year.
What is this year's rate of inflation
= (108-110)/110 =-1.818%
What term do economists use to describe this second outcome?
disinflation
 6. If your nominal income rose by 5.3 percent and the price level rose by 3.8 percent in some year, by what percentage would your real income (approximately) increase?
Real income % rise =...
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