Problem 1: The following information is to be used for calculations of the unemployment rate: Suppose there are two major groups, adults and teenagers, with adults divided into men and women. teenagers account for 10 percent of the labor force; adults account for 90 percent. Women make up 35 percent of the adult labor force. Suppose also that the unemployment rates for these groups are as follows: teenagers, 19 percent; men, 7 percent; women, 6 percent. a. Calculate the aggregate unemployment rate. b. What if the share of teenagers in the labor force increases from 10 to 15 percent. How will this affect the aggregate unemployment rate?
Problem 2: Discuss the differences in the unemployment patterns of adults and teenagers. What does this imply about the types of jobs (on average) that the groups are seeking?
Problem 3: Discuss strategies whereby the government (federal, state, or local) could reduce unemployment in or among (a) depressed industries, (b) unskilled workers, (c) depressed geographical regions, (d) teenagers. Include comments on the type of unemployment you would expect to see in these various groups, as well as on the relative duration of unemployment spells that should exist among these groups.
Problem 4: In Section 5.1 of this chapter we stated that changes in potential GDP do not depend on the price level, or in other words, "potential GDP is exogenous with respect to the price level." the goal of this exercise is to give you a chance to convince yourself that this is the case.
A) . For data, go to fred.stlouisfed.
Type "GDPPOT", then search for potential real GDP
Type "GDPDEF", then search for GDP implicit price deflator You will need to take the average of the four quarters of each year to get the annual average. (Hint: Use the average command in excel.)
b. Calculate the annual growth rate of potential r GDP and the annual inflation rate from the GDP deflator. Create a scatter plot that has the growth rate of potential GDP on the Y axis and the annual inflation rate in the GDP deflator on the X axis. Can you visually identify any relationship between the two variables?