Question

HOMEWORK B2a & b - Required

Chapter ‘Unemployment and Inflation’

Q1.        Refer to Exhibit 1 in the chapter to determine whether each of the following statements is true or false.

1. Some people who are officially unemployed are not in the labor force.
2. Some people in the labor force are not working.
3. Everyone who is not unemployed is in the labor force.
4. Some people who are not working are not unemployed.   

Q6.      Explain why most experts believe that official U.S. data underestimate the actual rate of unemployment. What factors could make the official rate overstate the actual unemployment rate?

Q9.      If actual inflation exceeds anticipated inflation, who will lose purchasing power and who will gain?

Q12.    Why is a relatively constant and predictable inflation rate less harmful to an economy than a rate that fluctuates unpredictably?

P15.      Suppose that the U.S. non-institutional adult population is 230 million and the labor force participation rate is 67 percent.

1. What would be the size of the U.S. labor force?
2. If 85 million adults are not working, what is the unemployment rate?

P16.     Determine whether each of the following would be considered frictional, structural, seasonal, or cyclical unemployment:

1. A UPS employee who was hired for the Christmas season is laid off after Christmas.
2. A worker is laid off due to reduced aggregate demand in the economy.
3. A worker in a DVD rental stores becomes unemployed as video-on demand cable service becomes more popular.
4. A new college graduate is looking for employment.

Answer 1

Q1 is incomplete so Q2 is answered below.

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6.

Factors which underestimate the actual rate of unemployment are:

Discouraged workers are not counted in unemployed category

Part time workers are not counted in employed category and labor force

The underemployed workers are not counted accurately in the official unemployment records

The exclusion of these two category of people leads to the official unemployment rate underestimate the actual rate of unemployment

Factors which overestimate the actual rate of unemployment are:

Since countries give unemployment benefits to workers, some people act like they are not working and are unable to find jobs in order to receive unemployment benefits and enjoy life without working. These people add up to the unemployed numbers and overstate the actual rate of unemployment.