Quiz 2 - 1. Question: (TCO F) The size of the labor force...

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1. Question: (TCO F) The size of the labor force in a community is 800, and 720 of these folks are gainfully employed. In this community, 200 people over the age of 16 do not have a job, and are not looking for work. In addition, 100 people in the community are under the age of 16. The unemployment rate is: Your Answer: Unemployment rate = unemployed/labor force x 100 (80/800) x 100 = 10% Unemplyment rate = 10% Instructor Explanation: The unemployment rate is calculated by dividing the number of unemployed by the labor force. The labor force is calculated by subtracting three things from the population (# under 16, # of institutionalized adults, and # not looking for work). In this example, you are given the size of the labor force (800) , and you are also told that 720 are employed. Therefore, 80 are unemployed, and the unemployment rate is simply 80/800 or 10%. Points Received: 15 of 15 2. Question: (TCO F) Suppose nominal GDP in 2005 was $14 trillion and in 2006 it was $15 trillion. The general price index in 2005 was 100 and in 2006 it was 103. Between 2005 and 2006 real GDP rose by what percent? Your Answer: Nominal GDP is the value of the economy's output of final goods and services valued in dollars of the year being measured. Real GDP, on the other hand, is the value of the economy's output of final goods valued in a base year—the latter being accomplished by deflating the current dollar or nominal dollar value of output using price indexes having a particular base year equal to 100. Nominal and real GDP must be equal in the base year. In 2005 GDP = 14T, price index = 100 In 2006 GDP = 15T, price index = 103 Since nominal and real GDP must be equal in the base year 15T/1.03 = 14.56T (14.56 -14.00)/14.00 = 4% Instructor Explanation: You need to make use of the inflation formula for the GDP deflator here and compare results between the two years. For 2005: 100 = [$14 T / Real GDP] x 100 So, Real GDP must equal $14 T. You could also recognize that Real GDP and nominal GDP are the same in the base year. For 2006:
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103 = [$15 T / Real GDP] x 100 1.03 = [$15 T / Real GDP] Real GDP = $15 T / 1.03 So, Real GDP must equal $14.563 T. The percentage increase in Real GDP will then be [(14.563 - 14) / 14] x 100 = (0.563 / 14) x 100 = 4.02% Therefore Real GDP increases by 4.02% between 2005 and 2006. Points Received: 20 of 20 3. Question:
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Quiz 2 - 1. Question: (TCO F) The size of the labor force...

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