# ps3 Answers - Mark Evers Economics 1020 University of...

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Mark Evers Economics 1020 University of Denver Spring 2010 ANSWERS TO PROBLEM SET #3 1) Using the formulas discussed in class: a) Unemployment Rate = Unemployed / ( Employed + Unemployed) = Unemployed / Labor Force = 15.005 / (138.905 + 15.005) = 9.75% b) Labor Force = Employed + Unemployed = (138.905 + 15.005) = 153.91 million c) Labor Force Participation Rate = Labor Force / Working Age Population = 153.91 / 237.159 = 64.90% d) The movement of discouraged workers from being not in the labor force to unemployed will change the unemployment rate calculation: Unemployment Rate = (15.005 + .50) / (153.91 +.50) = 10.05% Thus, when discouraged workers reenter the labor force but still can't find a job, the calculated unemployment rate of 9.75% will increase by .30 Percentage Points or 3%. 2) a) 2009 Index =.20 (100)+.40 (100)+.20 (100)+.10 (100)+.10 (100) = 100 b) 2010 Index =.20 (110)+.40 (70)+.20 (105)+.10 (125)+.10 (90) = 92.5 c) Rate of Change = (92.5 - 100) / 100 = -7.5% d) This is a Deflation over the time period since the rate of change in the Aggregate Price Level is negative. 3) Recall that: IPD = NGDP / RGDP, RGDP = NGDP / IPD, NGDP = RGDP IPD. So the completed table is:

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Year RGDP NGDP IPD 2007 13254.1 14195.1 1.071 2008 13224.7 14441.4
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