Case Study 2 - GDP, Inflation, and Unemployment

BACKGROUND INFORMATION - GDP

Read this handout containing information from your textbook about the concepts you will apply in this scenario.

BACKGROUND INFORMATION - UNEMPLOYMENT

Read this handout containing information from your textbook about the concepts you will apply in this scenario.

BACKGROUND INFORMATION - INFLATION

Read this handout containing information from your textbook about the concepts you will apply in this scenario.

POINTS AND GRADE

This assignment contains 12 questions and a total of 100 points. The specific weight of towards your final grade is 4%.

SCENARIO INTRODUCTION

Use the information provided below to complete the questions.

Suppose that data below corresponds to the small nation of Collegeville with a population of 3,200 people. Of the 3,200 residents 689 are under 16 years of age, and 349 are institutionalized adults. Of the remaining residents, 451 are without jobs and have given up searching for a job, 240 do not have a job, but are actively seeking work, 351 work part time, and the rest work full time. Over the years, the natural rate of unemployment has been found to be 8%. In 2018 the Cost of the Market Basket was $2,340.00. In 2019 the Cost of the Market Basket was $2,855.00. In 2020 the Cost of the Market Basket was $3,230.00.

(Table 1) National Income Accounting latest year data for Collegeville

Consumption of Durable Goods	$800,000
Consumption of Nondurable Goods	$650,000
Compensation of Employees	$565,000
Consumption of Services	$1,150,000
Fixed Residential Investment	$200,000
Corporate Profits	$120,000
Fixed Nonresidential Investment	$600,000
Consumption of Fixed Capital	$60,500
Change in Inventories	$300,000
Government Purchases of Goods and Services	$1,200,000
Exports	$300,000
Imports	$70,000

CALCULATING GDP

1. According to the information provided in the GDP background information handout, a) what are the 4 categories of the expenditures approach? b) how are these categories used to calculate GDP?(8 points)

CALCULATING INFLATION & UNEMPLOYMENT

2. How many discouraged workers does Collegeville currently have? Is this group considered to be in the Labor Force? Why or why not?(6points)

3. Calculate the unemployment rate for Collegeville. Round the percentage to one decimal place; that is, 4.36% is 4.4%. (6 points)

4. Once you have calculated the current unemployment rate in Collegeville, what is the corresponding "employment rate". In other words, which proportion of the labor force is considered employed?(6points)

5. Explain the differences between the various unemployment measures of U1, U2, U3, U4, U5, and U6 in your own words. Here is a first link to start reading: https://www.bls.gov/lau/stalt.htm#:~:text=U%2D1%2C%20persons%20unemployed%2015,the%20official%20unemployment%20rate)%3B