CHAPTER 7

4. (1.5 points) An economy starts off with a per capita GDP of $2,400.

a. How large will the per capita GDP be if it grows at an annual rate of 3% for 10 years?

b. How large will the per capita GDP be if it grows at an annual rate of 3% for 30 years?

c. How large will the per capita GDP be if it grows at an annual rate of 6% for 30 years?

5. (2 points) Say that the average worker in Mexico has productivity of $21 per hour while the average worker in Spain has productivity of $25 per hour (both measured in U.S. dollars). Over the next 11 years, say that worker productivity in Mexico grows at 2% per year while worker productivity in Spain grows at 1% per year. Use that information to answer parts a. and b. below.

a. After the 11-year period, which country will have the higher productivity level?

b. How much higher will the productivity level be in the country with higher productivity after 11 years?

6. (2 points) In 2021, Brazil had an estimated population of around 214.3 million people, while Uruguay had an estimated population of around 3.4 million people (SOURCE: World Bank Links to an external site.). With that in mind, answer parts a. and b. below.

a. What is the issue with comparing the total GDP of Brazil (converted to U.S. dollars) with that of Uruguay (also converted to U.S. dollars)?

b. What could be a better measure for comparing the two countries?

7. (2 points) You are trying to compare the economies of two countries: Bolivia and Chile. Bolivia grows at 4% and Chile grows at 3%. Also assume each country starts with an income level of $21,600. What will the incomes of Bolivia and Chile be in 20 years?

8. (1.5 points) Would the following events usually lead to capital deepening? Answer yes or no for parts a., b., and c. below.

a. A decrease in international trade due to shutdowns from a global pandemic.

b. A trend in which many more adults are pursuing graduate degrees beyond a bachelor's at a 4-year institution.

c. An economic recession that causes companies to dramatically decrease their long-term expenditures on physical capital.

9. (1 point) An economy starts off with a GDP per capita of $5,000. How large will the GDP per capita be if it grows at an annual rate of 1% for 10 years?

CHAPTER 8

10. (1 point) Answer parts a. and b. below.

a. What causes cyclical unemployment?

b. What is the "preferred" solution to solve cyclical unemployment?

11. (2.5 points) For a. through j. below, say whether the individual described is employed, unemployed, out of the labor force, or underemployed.

a. Someone working at their father's company: employed/unemployed/out of the labor force/underemployed (to indicate your answer, bold, underline, or highlight one of the options listed)

b. A 12-year-old: employed/unemployed/out of the labor force/underemployed (to indicate your answer, bold, underline, or highlight one of the options listed)

c. An active duty member of the military: employed/unemployed/out of the labor force/underemployed (to indicate your answer, bold, underline, or highlight one of the options listed)

d. A worked laid off from an auto repair shop: employed/unemployed/out of the labor force/underemployed (to indicate your answer, bold, underline, or highlight one of the options listed)

e. Someone looking for a job as an electrician, who has never been trained as an electrician: employed/unemployed/out of the labor force/underemployed (to indicate your answer, bold, underline, or highlight one of the options listed)

f. A trained bartender working at a bar in New York City: employed/unemployed/out of the labor force/underemployed (to indicate your answer, bold, underline, or highlight one of the options listed)

g. An 80-year-old retiree: employed/unemployed/out of the labor force/underemployed (to indicate your answer, bold, underline, or highlight one of the options listed)

h. Someone who has been out of work for 3 weeks but isn't looking for a job: employed/unemployed/out of the labor force/underemployed (to indicate your answer, bold, underline, or highlight one of the options listed)

i. A math PhD working at a fast food restaurant: employed/unemployed/out of the labor force/underemployed (to indicate your answer, bold, underline, or highlight one of the options listed)

j. Someone who is satisfied with their current job as a grocery store worker, but is looking for a new position with higher pay: employed/unemployed/out of the labor force/underemployed (to indicate your answer, bold, underline, or highlight one of the options listed)

12. (2 points) After reading section 8.2 in our textbook, indicate whether each statement about unemployment patterns in the United States in parts a. through d. below is true or false.

a. Individuals with less education typically face lower unemployment. True or false?

b. People ages 20 to 24 typically face higher unemployment than people ages 55 and over. True or false?

c. The gap between the unemployment rate for Hispanic workers and the unemployment rate for white workers diminished since the 1990s. True or false?

d. The unemployment rate for women was historically higher than that for men, although men faced a higher unemployment rate during the recession that began in 2008. True or false?

13. (2.5 points) What type of unemployment (cyclical, frictional, or structural) applies to each of the following? For each of a. through e. below, choose one of the underlined options: cyclical/frictional/structural.

a. A pocket watch repairer who loses their job when the economy hits a recession

b. A cashier at a retail store who loses their job when a new technology replaces their work

c. Diesel engine repair workers in a country rapidly transitioning away from diesel engine use

d. A farm laborer who quit their job in California and is now looking for work in Washington

e. A contractor who loses their construction job when the economy hits a recession

14. (1 point) There are many reasons discussed in section 8.3 of our textbook for why wages could be "sticky downward." Pick two of these reasons and briefly explain why you think one of your chosen reasons is a more important factor for making wages sticky downward than the other.

15. (1 point) Suppose that labor supply suddenly increases, but wages are sticky downward, so the prevailing wage remains unchanged. Use that information to answer parts a. and b. below.

a. As a result the quantity of labor demanded will be higher than/lower than (choose one) the quantity of labor supplied.

b. As a result there will be a rise in frictional/structural/cyclical (choose one) unemployment.