1.Suppose that because of the high unemployment rates it the United States, many Mexican-American hotel workers are returning to Mexico. However, Mexico's drug related violence made many tourists too scared to go to Mexico for vacation.

a) Illustrate the market for hotel workers in Mexico.

b) What happens to the equilibrium wage and level of employment?

2. The following table gives information for June 2006 and June 2007 on the thousands of unemployed people who are in the labor force and the thousands of people who are defined as unemployed. Column X gives information for the thousands of people not in the labor force because they believe that no job is available. Some regard those in column X as the hidden unemployed (they have searched for work in the past and are available to work, but they believe jobs are so scarce that looking for work is of no use).

Date # in labor force # unemployed X

Jun-06 152,557 7,341 481

Jun-07 154,252 7,295 401

a) By definition, those in column X are considered ______________________________.

b) Calculations. Write your answer in percentage terms, and round to the nearest hundredth.

i) Calculate the officially defined unemployment rates for June 2006.

ii) Calculate the officially defined unemployment rate for June 2007.

iii) What is the change in the officially defined unemployment rate from June 2006 to June 2007?

iv) Calculate the unofficial unemployment rates that include the hidden unemployed for June 2006.

v) Calculate the unofficial unemployment rates that include the hidden unemployed for June 2007.

vi) What is the change in the unofficial unemployment rate from June 2006 to June 2007?

c) What effect do you expect the change in the official unemployment rate to have on the number of discouraged workers? Explain.

d) How has the change in the number of discouraged workers affected the change in the officially defined unemployment rate from June 2006 to June 2007? Explain.

3.Suppose you have 16 hours per day available for work, and your wage rate is $10 per hour in the years 2011 and 2012. In 2011, you work eight hours per day. In 2012, you win the lottery, and your after-tax gain is $150 per day until you retire. As a result, you decide to work six hours per day instead of the usual eight hours per day.

a) Draw your daily budget constraint for 2011 and 2012, and indifference curves consistent with your work preferences. Label everything, including your income in 2011 and 2012.