Unemployment and Inflation - Version 2

Question 1 - Beloware some hypothetical statistics for a country in September 2020. Compute the unemployment rate for that month (all figures are in thousands).

Population 332,454
Working age population 260,776
Participation Rate 71.4%
Employed 173,905
Question	Your Answers & Calculations	Marks Possible (10)
What is the size of the labour force in this economy?		2
What is the unemployment rate in this economy?		1
What is the employment rate in this economy?		1
Suppose that 2500 of the unemployed people stop searching for work. What is the unemployment rate now?		3
Suppose that 8,000 people migrate to Canada and start to look for work as soon as they land in the country. What happens to the unemployment rate in that case? (Assume there are no discouraged worker from the above question)		3

Question 2: Classify each of the following types of unemployment. If you think that it is not a situation of unemployment, state "not in the labour force". One mark per question. Total of 6 marks.

Situation	Classification
Peter is a partial load instructor at Seneca college. His contract will end in December, but he knows that he will have a new contract in January to teach three more sections of BUS100. He will take the time to enjoy the holidays with his family. From December to January, Peter is:
Manny has recently retired from GM after a 35-year career. He was a senior electrician and the "go-to" person whenever the lines went down. He is 66 years old and receiving his full pension. After the Covid pandemic GM was desperate for electricians, so they called Manny and asked if he would return to GM. Manny was bored at home and happily accepted. Manny is:
Sameer is a ski instructor at Blue Mountain. He runs the downhill racing program for 450 kids. Once the snow is gone, he has to close up the program, and start looking for summer employments. Sameer is:
Penelope is participating in Ontario's Second Careers program. She used to be a very effective bank teller at CIBC, but with the introduction of the ATM machines, she lost her job. Penelope is:
Five engineers lost their jobs at an automaker because they are unable to upgrade their skills to work on the new line up of electric vehicles. These people are considered to be:
Dianne and John lost their jobs when the financial markets crashed in 2008. They spent 6 months looking for jobs during which time they were considered to be:

Question 3: Calculating a price index. (10 marks) Given the following table, construct a price index:

	Quantity	2018 Price	2018 Cost	2019 Price	2019 Cost
Books	5	$85		$90
Equipment	2	$45		$35
Travel	6	$15		$18
Shelter	12	$700		$750
Recreation	12	$25		$28
Food	12	$150		$175
Total

	Your Answer	Marks
If 2018 is the base year, what is the price index for that year?		2
What is the price index for 2019?		2
Suppose that the price index for 2021 was 114.6. How much inflation occurred between 2019 and 2021?		2
Suppose that the price index for 2017 was 98.2. How much inflation occurred between 2017 and 2018?		2
If your nominal income does not change between 2018 and 2019, what can be said about your level of real income? You only need one sentence to explain this.		2

Question 4: (5 marks)

Teenagers have the highest unemployment rates of any group. One reason for this phenomenon is high transportation costs for many minority teens. What form of unemployment (cyclical, frictional, or structural) do high transportation costs suggest?

You must decide what kind of unemployment exists and WHY HIGHER TRANSPORTATION COSTS make it so.

Note: This question is worth 5 marks. You must be thorough (not repetitive) in your answer. Fully explain your choice and why you made that choice. You must answer in the space provided.

Question 5: (5 marks)

Note: This question is worth 5 marks. You must use the terms discussed in the lesson to clearly demonstrate your understanding of this material. I am evaluating particular concepts here, so be specific in your answer. Be thorough (not repetitive) in your answer as well. You must answer in the space provided.

	Your answer	Marks
Under what conditions do you expect to see an inflationary gap?		1.5
Under what conditions do you expect to see a recessionary gap?		1,5
How is it possible to measure the amount of lost output (GDP) due to cyclical unemployment?		2