08 Jun Question workers will the bakery hire if the n
Question
workers will the bakery hire if the nominal wage rate is $8?
d. Suppose the price of bread increased to $2 per loaf. How many workers will the bakery hire if
the nominal wage rate is $8?
2. Assume that the production function is given by Y = A K .4 L .6
where Y = National Income =GDP, K = 100, L= 400, and A = 10.
a.
b.
c.
d.
e.
Calculate National Income (Y)?
Derive the equation for the marginal product of labor (MPL)
What happens to the MPL as K increases?
Derive the equation for the marginal product of capital (MPK)
What happens to the MPK as K increases?
3.In December 2005, the BLS estimated there were 7.4 million unemployed, 142.8 million
employed (including 2.8 million involuntary part-time workers), 451,000 discouraged workers
and 4.8 million people (including discouraged workers) who were marginally attached to the
labor force.
a. Calculate the headline (U-3) unemployment rate for December 2005.
b. Calculate the unemployment rate for December 2005 if it had included among the
unemployed all officially discouraged workers.
c. Calculate the unemployment rate if it had included all those who were marginally
attached to the labor force?
d. Calculate the unemployment rate if it had included all those who were marginally
attached to the labor force plus involuntary part-time workers.
4. Fred Data Exercise – You must do the data exercise in order to receive credit for
questions 1 through 3 above.
Unemployment
1. Go to the FRED website. In the search box type in “civilian unemployment rate. Click on
“seasonally adjusted.” This is the U-3 measure of unemployment. Not surprisingly,
unemployment increases during recessions. Based on the graph (no need to print), how
high did unemployment get in the 1981 recession? How about the last recession?
2. In the search box type in “Civilian Labor Force Participation Rate”. Next click on
“Civilian Labor Force Participation Rate”. Graph “seasonally adjusted”. Define the
Labor Force Participation Rate (LFPR) and describe the overall pattern from 1960
through 2015.
3. The graph starts in 1950. Use the slider under the graph to start the graph in 1990. Why
do you think the LFPR has been declining since 2000?
4. Click on “Add Series”. Search for Civilian Labor Force Participation Rate: 25 to 54
years. Add series. Now click on “edit series for 25 to 54 and click “right” for Y-Axis
position. Print the graph.
5. How would you respond to the argument that the LFPR is declining because “babyboomers” are retiring.
6. The Labor Force Participation Rate (LFPR) in January 2008 was 66.23%. In June 2015
the LFPR had decreased to 62.65%, the unemployment rate was 5.3%, the adult
population was 250,663 (thousand) and the number of people employed was
148,738(thousand). Determine the unemployment rate in June 2015 if the LFPR had
remained at 66.23%. Show your work.
7. Go to the BLS website http://www.bls.gov/news.release/empsit.nr0.htm
Find the Employment situation Report for August 2015.
Go to Table A-15: Alternative measures of labor underutilization. For August 2015,
what were the U-4, U5 and U-6 measures of unemployment.
8. Go to the Federal Reserve Economic Data (FRED) web site: http://research.stlouisfed.org/fred2/
In the search box in the upper right hand corner, type in “Quits”. Next click on “Quits: Total Nonfarm”.
Copy/Paste the graph in the space below:
What are “quits”.
What happens to “quits” during recessions?
9. In the search box in the upper right hand corner, type in “layoffs”. Next click on “Layoffs and
Discharges: Total Nonfarm”.
Copy/Paste the graph in the space below:
What happens to “Layoffs and discharges” during recessions?
10. In the search box in the upper right hand corner, type in “hires”. Next click on “Hires: Total
Nonfarm”.
Copy/Paste the graph in the space below:
What happens to “”hires” during recessions?
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