Question 3

3. Types of unemployment The three people described in the following table are categorized as unemployed by the Bureau of Labor Statistics. Identify each person in the table as structurally, frictionally, or cyclically unemployed. Unemployment Type Structural Frictional Cyclical Kyoko just graduated from college and is looking for a full-time position with an investment banking firm. O O O Rina is a real estate agent. House sales in her area have declined because the region has been going O O O through a recession. She has no clients and is currently looking for a new full-time job. Jacques recently lost his job as a delivery driver. Minimum-wage legislation keeps employers from adding O O O more of the low-skill positions for which he qualifies, so he has been unable to find work. The following table presents data on frictional, cyclical, structural, and total unemployment for an economy. Rate Unemployment Type (Percent) Frictional 3.1 Cyclical 0.0 Structural 1.0 Total unemployment 4.1 True or False: This economy is currently at its natural rate of unemployment. True False Grade It Now Save & Continue5. Minimum-wage laws and unemployment Consider the labor market defined by the supply and demand curves plotted on the following graph. Use the calculator to help you answer the following questions. You will not be graded on any changes you make to the calculator. Graph Input Tool ? 24 Market for Labor 21 Supply Wage 3.00 (Dollars per hour) 18 Labor Demanded 1,050 Labor Supplied 150 Thousands of Thousands of workers) 15 workers) 12 WAGE (Dollars per hour) Demand Co 0 0 300 450 600 750 900 1050 1200 LABOR (Thousands of workers)Complete the following table with the quantity of labor supplied and demanded if the wage is set at $9.00. Then indicate whether this wage will result in a shortage or a surplus. Hint: Be sure to pay attention to the units used on the graph and in the table. For example, type in 100 for 100,000 workers. Labor Demanded Labor Supplied Wage (Thousands of workers) (Thousands of workers) Shortage or Surplus? $9.00 Suppose the federal government contemplates a new law that would create a national minimum wage of $9.00 per hour. Which of the following statements are true? Check all that apply. Binding minimum wages cause frictional unemployment. In the absence of price controls, a shortage puts upward pressure on wages until they rise to the equilibrium. In this labor market, a minimum wage of $9.00 is binding. If the minimum wage is set at $12.50, the market will not reach equilibrium. Grade It Now Save & Continue8. Risk and return Suppose Alyssa is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds. Fraction of Portfolio in Diversified Average Annual Standard Deviation of Portfolio Return Stocks Return (Risk) Combination (Percent) (Percent) (Percent) 0 4.00 25 7.00 5 50 10.00 10 75 13.00 15 m 100 16.00 20 If Alyssa reduces her portfolio's exposure to risk by opting for a smaller share of stocks, she must also accept a average annual return. Suppose Alyssa currently allocates 75% of her portfolio to a diversified group of stocks and 25% of her portfolio to risk-free bonds; that is, she chooses combination D. She wants to reduce the level of risk associated with her portfolio from a standard deviation of 15 to a standard deviation of 5. In order to do so, she must do which of the following? Check all that apply. Accept a lower average annual rate of return Sell some of her bonds and use the proceeds to purchase stocks " Sell some of her stocks and use the proceeds to purchase bonds Place the entirety of her portfolio in bonds The table uses the standard deviation of the portfolio's return as a measure of risk. A normal random variable, such as a portfolio's return, stays within two standard deviations of its average approximately 95% of the time. Suppose Alyssa modifies her portfolio to contain 50% diversified stocks and 50% risk-free government bonds; that is, she chooses combination C. The average annual return for this type of portfolio is 10%, but given the standard deviation of 10%, the returns will typically (about 95% of the time) vary from a gain of to a loss of