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PROBLEMS 1. How much more output will the average American have next year if the \$12 trillion U.S. economy grows by: a. 2 percent? b. 5 percent? c. -1.0 percent? (Assume a population of 295 million): a) \$814 b) \$2033 c) - \$407 To calculate the change in GDP per capita, multiply the GDP by the percent change and divide by the population. 2. Suppose the following data describe a nation’s population Year 1 Year 2 Population 200 million 203 million Labor Force 120 million 125 million Unemployed 7.2 million 7.5 million a. What is the unemployment rate in each year? b. How has the number of unemployed changed from Year 1 to Year 2? c. How is the apparent discrepancy between (a) and (b) explained? a. The unemployment rate is calculated as the number of unemployed divided by the labor force. Using this formula, the unemployment rate in year 1 is 7.2 million/120 million = 0.06 or 6 percent. The unemployment rate in year 2 is 7.5/125 million = 0.06 percent or 6 percent. b. The number of unemployed increases by .3 million or 300,000 workers. c. The unemployment rate is determined by both the number of unemployed and the size of the labor force. Even though the number of people who were counted as unemployed increased by 300,000, the size of the labor force also increased by the same proportion, resulting in no change in the unemployment rate. CHAPTER 10

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