Question 1.

Based on the US experience of past economic recoveries, predict what is likely to happen to the US LFPR and Unemployment Rate (U-3) right after the end of the COVID recession? Please explain your reasoning. Your answer to this question should be under 5 lines of typed text.

Question 2.

(ALL PARTS OF THIS QUESTION ARE BONUS PORTS)

a) Consider an economy with two labor markets - one for manufacturing workers and one for service workers. Suppose that none is initially unionized. Draw separate Labor Market diagrams for each type of workers.

b) If manufacturing workers formed a union, what impact on the wages and employment in manufacturing would you predict? Please show it on your Labor Market graph you draw for part (a).

c) How would the unionization of manufacturing workers in (b) affect the Labor Market for service workers? Illustrate your answer on the graph you draw for part (a)

Question 3.

How these events affect current-year US GDP and its components? Use the table below to indicate your answers and, if needed, space after the table to briefly explain your reasoning.

a) Chemistry Surfboards based out of Oceanside, CA manufactures a board in 2019 and does not sell it that year.

b) In 2020, the US government pays unemployment compensation to Stephany and Greg.

c) Stephany buys the Chemistry surfboard from part (a).

d) Greg buys a surfboard, produced by Hayden Shapes in Australia.

e) Trinity and Neo, shareholders of Chemistry Surfboards, sell some of their shares.

f) Trinity uses the cash from part (e) to buy Stephany's condo.

g) Neo uses his money from part (e) to build a house.

h) Neo finishes the construction of his house from part (g) and starts living in it.

Note: for all parts of this question, assume the profit margin is zero.