1. What is the definition of the unemployment rate? What are some potential short-comings of this single measure/
2. What was the unemployment rate in December 2009. Suppose the U.S. unemployment rate in December 2009 had been 5%, instead of at Great Recession levels. How many more people would have been working (assuming the labor force remained the same)?
3. In a graph, show the U.S. employment-population ratio for men and women since the middle of the 20th century. Offer some some possible explanations for the different trends in the two series between 1950 and 2000? What might explain the change in the trend for women since 2009?
4. A positive oil stock: Suppose scientists discover a way to extract oil from deposits that were previously thought to be unrecoverable. The extra supply of oil leads oil prices to decline by $5 per barrel. Explain the effect on wages, the employment-population ration, and unemployment - all for the overall economy.
5. What are some examples of changes in the economy that would cause the labor supply curve to shift? What might shift the labor demand curve? How do these changes affect the wage rate and the employment-population ratio?
6. What is the difference between the natural rate of unemployment and cyclical unemployment? How are these related to structural and frictional unemployment? The President of the Minneapolis Federal Reserve Branch Bank has suggested the natural rate may have decreased in recent years. Offer some reasons why he may be correct.
7. Consider
an economy in which the marginal product of labor
MPN is MPN=284-2N
where N is the amount of labor used. The amount of labor supplied,
NS, is given by
NS=22+12w+2T,
where w is the real wage and T
is a lump-sum tax levied on individuals.
a)
Use the concepts of income effect and
substitution effect to explain why an increase in lump-sum taxes will increase
the amount of labor supplied.
b)
Suppose that
T=25. What are the equilibrium values
of employment and the real wage?
c)
With T
remaining equal to 35, the government passes minimum-wage legislation that
requires firms to pay a real wage greater than or equal to 7. What are the
resulting values of employment and the real wage?
a)
Assume that the tax rate on labor income,
t, equals zero. Find the equation of
the labor demand curve. Calculate the equilibrium levels of the real wage and
employment, the level of full-employment output, and the total after-tax wage
income of workers.
b)
Repeat part (a)
under the assumption that the tax rate on labor income,
t, equals 0.6.
c)
Suppose that a minimum wage of
w=3 is imposed. If the tax rate of
labor income, t, equals zero, what are
the resulting values of employment and the real wage? Does the introduction of
the minimum wage increase the total income of workers, taken as a group?
9. How would each of the following affect the current level of full-employment output? Explain and illustrate your answer with a graph.
a)
A large number of immigrants enter the country.
b)
Energy supplies become depleted.
c)
New teaching techniques improve the educational
performance of high school seniors.
d)
Home prices increase
significantly in an
unexpectedly hot real estate market.
e)
Originally an unskilled worker, Joe acquires
skills that give him access to a higher-paying job. Assume that his preferences
about leisure are not affected by the change in jobs.
e) A major virus hits China.