1. Suppose you hear of a news report that the economy is at full employment. You have friends who have just finished school and are searching for work, and you know of others who have lost their jobs and have joined retraining programs. Given this information, how can economy be at full employment?

2. What is the official U.S. unemployment rate for the month of September 2015? Assume the natural rate of unemployment is 4%. Compare the unemployment rate in September to the natural rate of unemployment. What accounts for the difference between the two rates?

3. Name and explain two reasons why the unemployment rate could understate the true amount of unemployment in the economy.

4. Suppose you hear nominal GDP has risen since last year. Is this enough information to ascertain whether the economy has grown over this period? Explain.