Homework2_answer

# Homework2_answer - Econ 352 Intermediate Economics YiLi...

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Econ 352 YiLi Chien Intermediate Economics Spring 2011 Homework Assignment 2 Answer Question 1: Unemployment Rate (20 pts) What is the definition of unemployment rate? List the cause of frictional unemployment and structural unemployment respectively. Answer: The definition of unemployment rate is the number of unemployment workers divided by the total labor force. The frictional unemployment is caused by the time to search for a job The structural unemployment is caused by wage rigidity which might result from minimum wage law, labor unions or efficiency wage. Question 2: Growth Rates (20 pts) If real GDP grows at 2% a year, how many years does it take for GDP to double? What is the general formula for the doubling of a time series that grows at a percent a year? Answer: In the general case, we are interested in the solution to k in the equation (1 ) 2 k a += where a is the growth rate. Take log of the equation ln 2 ln(1 ) k a = + If we plug .02 a = into this formula, the result is 35.002. Thus it takes around 35 years to double output

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## This note was uploaded on 04/02/2012 for the course ECON 352 taught by Professor Staff during the Fall '08 term at Purdue.

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Homework2_answer - Econ 352 Intermediate Economics YiLi...

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