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Macroeconomics

Glenn Hubbard, Tony O'Brien

Chapter 9

Unemployment and Inflation

Educators


Problem 1

How is the unemployment rate measured? What are the three conditions someone needs to meet to be counted as unemployed?

Xiaomin B.
Numerade Educator

Problem 2

What are the problems in measuring the unemployment rate? In what ways does the official BLS measure of the unemployment rate understate the true degree of unemployment? In what ways does the official BL.S measure overstate the true degree of unemployment?

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Problem 3

Which groups tend to have above-average unemployment rates, and which groups tend to have below-average unemployment rates?

Xiaomin B.
Numerade Educator

Problem 4

What does the labor force participation rate measure? since 1950 , how have the labor force participation rates of men and women changed?

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Problem 5

What does the employment-population ratio measure? How does an unemployed person dropping out of the labor force affect the unemployment rate? How does it affect the employment-population ratio?

Xiaomin B.
Numerade Educator

Problem 6

What is the difference between the household survey and the establishment survey? Which survey do many economists prefer for measuring changes in employment? Why?

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Problem 7

Fill in the blank cells in the following table of data collected in the household survey for June 2015 :
$$\begin{array}{|c|c|}\hline {\text { Working-age population }} & {} \\ \hline {\text { Employment }} & {148,739,000 } \\ \hline {\text { Unemployment }} & {} \\ \hline {\text { Unemployment rate }} & {5.3\%} \\ \hline {\text { Labor force }} & {} \\ \hline {\text { Labor force participation rate }} & {62.6\%} \\ \hline {\text { Employment-population ratio }} \\ \hline \end{array}$$

Xiaomin B.
Numerade Educator

Problem 8

Homemakers are not included in the employment or labor force totals compiled in the BLS household survey. They are included in the working-age population totals. Suppose that homemakers were counted as employed and included in labor force statistics. How would that change affect the unemployment rate, the labor force participation rate, and the employment-population ratio?

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Problem 9

In June 2015 , the unemployment rate declined to 5.3 percent from 5.5 percent in May. The labor force participation rate also declined from May to June, from 62.9 percent to 62.6 percent. If the labor force participation rate had remained unchanged from May to June, would the unemployment rate for June have been lower than, higher than, or equal to 5.3 percent? Briefly explain.

Xiaomin B.
Numerade Educator

Problem 10

In discussing the labor market during the recovery from the $2007-2009$ recession, Federal Reserve Chair Janet Yellen noted that "the employment-to-population ratio has increased far less over the past several years than the unemployment rate alone would indicate, based on past experience."
a. During an economic expansion, why would we normally expect the employment-population ratio to increase as the unemployment rate falls?
b. Why didn't the employment-population ratio increase as much as might have been expected during the recovery from the $2007-2009$ recession?

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Problem 11

In early 2015 , the employment-population ratio was increasing while the labor force participation rate
remained largely unchanged. Shouldn't both of these data series move in the same direction? Briefly explain how it is possible that they didn't.

Xiaomin B.
Numerade Educator

Problem 12

An article in the Wall Street Journal contained the following observation: "Every month, millions of workers leave the job market because of retirement, to care for children or aging parents, to pursue more education, or out of discouragement. Millions of others jump in after graduating."
a. Are the millions of workers leaving the job market for the reasons given counted as unemployed in the BLS data? Briefly explain.
b. Will the BLS count people entering the job market after graduating from high school or college as part of the labor force even if they don't find a job right away? Briefly explain.

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Problem 13

An article in the Wall Street Journal noted that over a four- month period in late 2014 , employment in the state of Georgia "rose 1$\%$ even as the state's jobless rate climbed 1.2 percentage points." Briefly explain how the state's unemployment rate could have increased at the same time that employment in the state was increasing.

Xiaomin B.
Numerade Educator

Problem 14

In his 2015 State of the Union address, President Barack Obama observed that "over the past five years, our businesses have created more than 11 million new jobs." Is it likely that the U.S. economy created only 11 million jobs during this time period? If not, what was President Obama referring to?

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