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Discuss how the following changes would affect the natural (or frictional) rate of unemployment:

a. Elimination of unions.

b. Increased participation of teenagers in the labor market.

c. Larger fluctuations in the level of aggregate demand.

d. Increase in unemployment benefits.

e. Elimination of minimum wages.

f. Larger fluctuations in the composition of aggregate demand.

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Related questions

1. In the long run, when prices are perfectly flexible:

a. aggregate supply is vertical and a market economy is self-correcting.

b. a market economy cannot self-correct.

c. government will be required to set prices to maintain equilibrium.

d. changes in aggregate demand cause equilibrium real GDP to change.

 

2. An increase in household wealth when the SRAS curve is upward sloping:

a. leads to an increase in the price level but has no impact on real GDP

b. has no impact on the price level but leads to an increase in real GDP

c. leads to an increase in both the price level and real GDP

d. has no impact on the price level or real GDP

 

3. In the long run, continued increases in aggregate demand not matched by similar increases in aggregate supply will cause:

a. an increase in the full-employment level of real GDP

b. a recessionary gap

c. a decrease in the price level

d. an increase in the price level

 

4. The vertical long-run aggregate supply curve implies that:

a. changes in aggregate demand will not affect the price level

b. the short-run aggregate supply curve is also vertical

c. natural or full-employment real GDP does not depend on the price level, in the long run

d. natural or full-employment real GDP is the same as the equilibrium real GDP in the short run

 

5. A rightward shift of the long-run aggregate supply curve illustrates:

a. economic growth

b. a recessionary gap

c. an inflationary gap

d. a decrease in natural real GDP

 

6. When the economy is in a recessionary gap

a. there is a surplus of labor

b. there is a shortage of labor

c. it is producing a real GDP level that is greater than natural real GDP

d. the unemployment rate is less than the natural unemployment rate

 

7. If the actual unemployment rate is less than the natural unemployment rate:

a. a recessionary gap exists and wages are likely to rise

b. an inflationary gap exists and wages are likely to rise

c. a recessionary gap exists and wages are likely to fall

d. an inflationary gap exists and wages are likely to fall

 

8. An economy in long-run equilibrium is producing:

a. a level of real GDP that is greater than its natural real GDP

b. where both the price level and real output are maximized

c. a level of real GDP equal to its natural real GDP

d. in the vertical range of aggregate demand.

 

1. Suppose in the first quarter of the year, Real GDP was $400 billion; in the second quarter it was $398 billion; in the third quarter it was $399 billion; and in the fourth quarter it was $395 billion. Has there been a recession? Explain your answer.

2. Suppose the total adult population of Neverland is 100 million. Of this total, 70 million have jobs, 7 million are full-time students, 3 million are retirees and 20 million are without jobs. Of the 20 million without jobs, 15 million are actively looking for work and 5 million have given up looking for work.
a. What is the labor force participation rate?
b. What is the unemployment rate?
c. How many people are discouraged workers?

3. If the frictional unemployment rate is 2 percent, natural unemployment rate is 5 percent, labor force is 100 million, and 82 million workers are employed, compute the following:
a. Structural unemployment rate
b. Unemployment rate
c. Cyclical unemployment rate

4. Briefly explain how each of the following will affect aggregate demand (i.e. increase/decrease/no effect and the reason why). Don’t draw any graph.
a. Interest rate rises.
b. Stock market crashes.
c. Dollar depreciates.
d. Global economy improves.

5. Briefly explain how each of the following will affect short-run aggregate supply (i.e. increase/decrease/no effect and the reason why). Don’t draw any graph.
a. Wages rise.
b. Labor productivity increases.
c. Crude oil price drops.
d. Producers become optimistic about the economy

1. Unemployment Rate = 10%

# Employed = 180 Million

# Working age population = 250 Million

-Calculate:

# Unemployed

# Labor Force

# Not in the Labor Force Labor Force Participation Rate

2. Assume current unemployment is 10%

A) Calculate cyclical unemployment.

B) Is it possible for cyclical unemployment to be negative? Explain

C) Explain what the natural unemployment rate is. Why is it 0%?

D) After a recession ends (expansion begins), would you expect unemployment to increase or decrease? What about natural unemployment?

E) Explain how it might be caused by discouraged workers if the actual unemployment went up after a recession? Refer to the unemployment calculation in your answer.

F) During our current recession, the government decided to increase the unemployment benefits that people received. How would you expect this to affect the unemployment rate? Which type of unemployment?

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