Paper 1.

1. Assume an economy is made up of the following groups:

100,000 full-time employees

20,000 retirees

10,000 people without jobs and looking for work

30,000 part-time employees

5,000 children under the age of 16

15,000 people without jobs but not looking for work

a) What is the unemployment rate? Show your work.

b) What is the labor force participation rate? Show your work.

2. Assume the unemployment rate in an economy is 8% and the labor force participation rate is 50%. If this economy has 500,000 unemployed people, what is the size of the labor force and the civilian population?

3. Suppose the labor force is made up of 1,000,000 people and the unemployment rate is 9%. If the natural rate of unemployment is 5%, how many people are frictionally and structurally unemployed (combined) and how many people are cyclically unemployed?

4. Suppose the civilian population of an economy is made up of 150 million people. If the unemployment rate is 5% and the labor force participation rate is 65%, how many people are employed, unemployed, and not in the labor force?

5. Of the 3 following individuals, which is structurally unemployed, frictionally unemployed, and cyclically unemployed?

i. During the Great Recession, John lost his job as a construction worker.

ii. Billy has decided he does not like his job and has quit in order to look for another.

iii. Because of the internet, Jimmy has lost his job as a door to door Encyclopedia salesman.

Paper 2: Multiple Choices

1

The point after an economy has finished going through a contraction and before it begins to go through an expansion is called a:

a) Recessionary trough

b) Business peak

c) Negative trend point

d) Growth inflection

2

After not having a job and searching for one for 6 months, Tingles grows frustrated and decides to stop looking in order to return to college. Tingles decision will cause the unemployment rate to

a) Increase, and the labor-force participation rate to increase

b) Decrease, and the labor-force participation rate to decrease

c) Increase, and the labor-force participation rate to decrease

d) Decrease, and the labor-force participation rate to increase

3

Gill is newly hired but waiting for his job to begin, Rosco has a full time job, Kenny is in the 5th grade and therefore not working, and Zed has no job but is currently looking for work. What is the unemployment rate amongst these 4 people?

a) 25%

b) 33%

c) 66%

d) 50%

e) 75%

4

Calculate the unemployment rate for the following economy. Assume all individuals are at least 16 years old.

Without jobs, but actively searching for work	20 million people
Working part-time jobs (20 hours per week)	50 million people
Retired from the work force	50 million people
Working full-time jobs	150 million people
Do not have jobs and would take jobs if offered, but are not actively searching	10 million people

a) 10%

b) 04%

c) 91%

d) 09%

5

Suppose there are 500,000 people that are employed, 100,000 that are unemployed, and 800,000 in the civilian population. What is the unemployment rate?

a) 6%

b) 1%

c) 5%

d) 20%

6

Suppose an economy has 100,000 full-time workers, 50,000 part-time workers, 20,000 without jobs but looking for work, and 30,000 retirees. What is the labor force participation rate?

a) 15%

b) 85%

c) 2%

d) 75%

7

Which of the following best describes frictional unemployment?

a) unemployment caused by business cycles

b) unemployment caused by outdated skills

c) unemployment caused by a lack of information

8

Timmy has been unemployed for 2 months. He currently has a job offer from an accounting firm and another job offer from a consulting firm. He plans on going to another job interview next week before making a decision about where to work. Timmy is best described as

a) Structurally unemployed

b) Cyclically unemployed

c) Frictionally unemployed

9

Which of the following unemployed people best represents someone structurally unemployed?

a) Chuck has lost his job as a translator due to advances in translation software

b) Zeke has found himself unhappy in his job and has quit in order to look for another job

c) Due to a failing economy, Susan was laid off, along with 500 other employees at her firm

d) Tim has lost his job due to his inability to work well with his co-workers

10

The natural rate of unemployment is composed of:

a) Frictional and structural unemployment

b) Frictional and cyclical unemployment

c) Structural and cyclical unemployment

d) Frictional, structural, and cyclical unemployment