CH 9 - Unemployment - HW problems - no answers

1. A country with an adult population of 120 million adults has 80 million employed, 5 million

unemployed, and the rest of the adult population is out of the labor force. What's the unemployment rate? What share of the population is in the labor force? Sketch a pie chart that divides the adult population into these three groups.

2. Say whether each of the following would be counted as "unemployed" in the U.S. government survey. Briefly explain your answers.

a. A husband willingly stays home with children while his wife works

b. A manufacturing worker whose factory just closed down

c. A college student doing an unpaid summer internship

d. A retiree

3. The quantity supplied and demanded of labor in the country of Shoppingland is shown in the table below. Draw two supply and demand diagrams for the labor market, assuming that wages are sticky downward. In the first diagram, show how a boom in sales that leads to an increase of 60 in the quantity of labor demanded at every level of wages will affect quantity supplied, quantity demanded, and the wage. In the second diagram, show how a drop in sales that leads to a drop of 50 in the quantity of labor demanded (from the original labor demand curve) will affect the quantity of labor supplied, quantity of labor demanded, and the wage.

Hourly Pay                   Quantity Supplied                    Quantity Demanded

    16                                         240                                           340

    18                                         270                                           320

    20                                         300                                           300

    22                                         320                                           290

    24                                         340                                           280

    26                                         360                                           270

4. Compare Country Alpha with Country Omega. Which country would you expect to have a higher unemployment rate in each of the following situations?

a. Alpha has a larger share of its population under age 25; Omega has a larger share of its population between the ages of 25-54, men or women.

b. Residents of Alpha tend to have a higher education level than residents of Omega.

c. Alpha recently had an unexpected surge of labor productivity.

d. Residents of Omega are happy to move around the country for jobs, but residents of Alpha prefer to stay put.

e. Alpha and Omega have in the past provided unemployment benefits for an unlimited amount of time, but now Alpha sets a six-month limit for receiving such benefits.

5. The U.S. unemployment rate increased from 4.6% in July 2001 to 5.9% by June 2002. Without studying the subject in any detail, would you expect that a change of this kind is more likely to be due to cyclical unemployment or a change in the natural rate of unemployment? Why?