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AnswersforEconTest - 1 The unemployment rate is calculated...

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1) 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%. 2) You need to make use of the inflation formula for the GDP deflator here and compare results between the two years. For 2005: 100 = [\$12 T / Real GDP] x 100 So, Real GDP must equal \$12 T. You could also recognize that Real GDP and nominal GDP are the same in the base year. For 2006: 102 = [\$15 T / Real GDP] x 100 1.02 = [\$15 T / Real GDP] Real GDP = \$15 T / 1.02 So, Real GDP must equal \$14.706 T. The percentage increase in Real GDP will then be [(14.706 - 12) / 12] x 100 = (2.706 / 12) x 100 = 22.55% Therefore Real GDP increases by 22.55% between 2005 and 2006. 3) The rate of inflation is the rate of change of the inflation indicator, or more specifically: [(New

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AnswersforEconTest - 1 The unemployment rate is calculated...

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