Q1. Answer following arguments regarding unemployment by T (true) or F (false).

1. As more people give up looking for work, the unemployment rate goes down.
2. The unemployment rate is the ratio of the unemployed to the economically active population.
3. The higher the labor force participation rate, the higher the unemployment rate.
4. The employment rate does not change even if more people give up looking for a job.
5. When the employment rate rises, the unemployment rate falls.

Q2. Answer following arguments regarding unemployment by T (true) or F (false).

1. An increase in the number of people giving up looking for a job reduces the unemployment rate.
2. The working age population refers to the population aged 15 years or older.
3. The unemployment rate is the share of the unemployed among the economically active population.
4. The economically inactive population includes full-time students, housewives, and retirees.
5. The economically active population refers to the population participating in economic activities among the working-age population.

Q3. The working age population in the economy is 30 million. Of these, 15 million were employed and 5 million were unemployed. What are the economically active population, unemployment rate, and employment rate in this economy, respectively?

Q4. Answer following argument regarding frictional unemployment by T (true) or F (false)

1. Because it takes time for workers to find the job that best suits them.
2. This is because firms tend to pay higher than the market equilibrium wage to increase productivity.
3. This is because union members' wages are set higher than productivity due to the existence of a union.

Q5. If Jason deposited $10,000 in Fourth National Bank and Samuel took a $30,000 loan from Fourth National Bank, what would be the change of quantity of money (= Currency + Demand Deposit) due to these two financial transactions?

Q6. All banks only hold legally required reserves, and all excess funds are managed in the form of loans. And there is no cash leakage outside the whole banking system. If the legally required reserve ratio is 20%, (1) when an individual deposits $100 million in the Fifth National Bank, find the amount of demand deposit and quantity of money in the whole banking system, (2) when the Fifth National Bank borrows $100 million from the central bank and lends out, find the amount of demand deposit and quantity of money in the whole banking system?

These are two separate questions!

Q7. In a country called "Dully", it is known that about 80% of bank loans are deposited in another bank again. Dully's legal reserve ratio is 10%, but Dully banks are said to keep the reserve at 25% of the deposit amount in case customers' withdrawal requests increase. Assume that the Dully's Central Bank purchases $10 million worth of government bonds from Smurf Bank, one of the deposit banks, to stimulate the economy. The Smurf Bank lent all of their newly increased reserves to Mr. Papasmurf.

1. How much does the quantity of money increase by the transaction which Central Bank purchases government bond from Smurf bank?
2. How much does the quantity of money increase by the transaction which Smurf Bank loans to Mr. Papasmurf?