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homework3sol - Macroeconomic Principles Economics 1101...

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Unformatted text preview: Macroeconomic Principles Economics 1101 Spring 2010 Homework Set 3: Solutions Name : TUiD : Section 1: Definition type questions. Each definition is worth 2 points. Section 2: Short answer questions. Each question is worth 10 points. 1 Definitions 1. Labor Market : 2. Labor Demand : 3. Labor Supply : 4. Labor Force : 5. Labor Force Participation Rate : 6. Unemployment : 7. Unemployment Rate : 8. Frictional Unemployment : 9. Structural Unemployment : 10. Seasonal Unemployment : 11. Cyclical Unemployment : 12. Full Employment : 13. Natural Rate of Unemployment : 14. Aggregate Demand : 15. Aggregate Supply : 16. Short Run Aggregate Supply : 17. Long Run Aggregate Supply : 18. Potential GDP : 19. Recessionary Gap : 20. Inflationary Gap : 1 2 Short Answer Questions 1. The US unemployment rate has shot up from about 5% in December 2007 to 10% today. Economists widely agree that the natural rate of unemployment in the US is about 4.5%. What do you think has contributed to the sudden increase in the unemployment rate with more than 7.8 million people losing their jobs in the last 18 months? Just talk about the current recession that was followed by a lot of companies shuttering down. Wages did not fall in the aftermath of the recession so the only way companies could continue to run was by laying off all extraneous staff and that is what they did. 2. Go to ftp://ftp.bls.gov/pub/suppl/empsit.cpseea1.txt . At the end of the page they have monthly statistics about the US labor market from September 2008 to December 2009. Explain what is happening to the following: (a) Labor force: The US labor force has shrunk in the course of this recession, and it is not because the...
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homework3sol - Macroeconomic Principles Economics 1101...

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