Labour force data for Pandora are given in the below table. Answer the questions given below using the data in the table. Calculate your answers rounding them to one decimal place.

	2018	2019	2020
Population	1000	1200	1600
Labour force	200	210	300
Working-age population	300	300	320
unemployed	25	30	40
CPI (2002=100)	102	105	107

(i) What is the unemployment rate for year 2019? (2 marks)

(ii) Explain three types of unemployment seen in an economy. (6 marks)

(iii) What are the annual inflation rates in the years 2020? (2 marks)

(a)

(i) The wage rates in the economy of Pandora have increased substantially due to a new wage settlement agreement. Discuss how it will impact the aggregate supply and the potential GDP of the economy. (6 marks)

(ii)Explain what the multiplier effect is and how it affects the economy. (4 marks)

(b)

(i) Briefly explain how a countercyclical fiscal policy will be implemented during a recession.

(6 marks)

(ii) If natural rate of unemployment is 8 per cent, actual rate of unemployment is 10%, and real GDP is $800 billion in Hobbiton, calculate the GDP gap. (4 marks)