Problem Set 1
Fall 2010 ECO 2013
Circle (or write down) the letter corresponding to the correct answer.
If you get 19 or 20
correct, then let the TA’s know that you have completed the problem set successfully.
[Address at end.] If fewer than 19, then try again, using the second set of variants and
answers.
To illustrate, on question 1, the first time through you would answer it as
written. The correct answer is 24, so if you put C, at least 20 weeks but less than 30
weeks, you got it right.
The second time through you would use “the incidence of
unemployment (i) is 0.003.”
The correct becomes 40, to if you put E, 40 weeks or more,
you got it right.
If you need a third attempt, use 0.007, and the answer is 17, and so on.
1. If the unemployment rate (UR) is 12% and the incidence of unemployment (i) is 0.005
per week, then in a steady state the average duration of unemployment (D) is
a. less than 10 weeks.
b. at least 10 weeks but less than 20 weeks.
c. at least 20 weeks but less than 30 weeks.
d. at least 30 weeks but less than 40 weeks.
e. 40 weeks or more.
(0.005: 0.003, 0.007, 0.009, 0.011)
(24: 40, 17, 13, 11)
2. If the average duration of unemployment increases by 10% and the incidence of
unemployment increases by 14%, the steady state unemployment rate increases by
a. less than 10%.
b. at least 10% but less than 20%.
c. at least 20% but less than 30%.
d. at least 30% but less than 40%.
e. 50% or more.
(duration up 10%: 2%, 5%, 8%, 12%)
(using approximate formula 24%: 16%, 19%, 22%, 26%)
3. Suppose that in millions the adult population is 150, the number employed is 110 and
the number unemployed is 10, then the unemployment rate is
a. less 6%.
b. at least 6% but less than 9%.