Problem Set: Unemployment and Inflation
Q1: When the economy is at full employment is the unemployment rate at 0 percent? Why or why not? Would you desire to live in an economy with the unemployment rate at 0 percent?
Q2: Here are some recent data on the U.S. consumer price index:
Year | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 |
CPI | 172.2 | 177.1 | 179.9 | 184 | 188.9 | 195.3 | 201.6 | 207.3 | 215.3 |
Calculate the rate of inflation from 2001 to 2002
Calculate the rate of inflation from 2007 to 2008
*Show your Math
Q3: Using the CPI data in question 5 determine if Joe’s real income is increasing. Calculate the real his real income.
Year | Nominal Income | Real Income |
2000 | $40,000 | |
2005 | $41,000 | |
2008 | $42,000 |
Q4: Calculate the unemployment rate for the following country:
Total Population 978
Under Age 16 250
Retired 100
Able but stopped looking for work 75
Currently Employed 450
Hint: Calculate the labor force first.
Q5: What are the three main goals of every economy and how do we measure progress towards goals?
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