Question

1. This question has several parts
   1. Discuss how we measure unemployment in the U.S.
   2. Discuss how we measure the labor force participation rate in the U.S.
   3. Define the different components to the unemployment rate (cyclical, structural, and frictional).
   4. Using specific terms, discuss how the measured unemployment rate might under-report the actual unemployment rate.

2. This question has several parts.
   1. Discuss how we measure inflation in the U.S.
   2. Identify some of the potential problems with this measure as well as the solution that the Bureau of Labor Statistics has come up with.

3. This question has several parts.
   1. Draw an AD/AS graph to demonstrate an economy that has come to rest in an inflationary gap. Label this equilibrium point 0.
   2. Describe how the Federal Reserve Bank could use open market operations (buy or sell treasury bonds) to cool the economy and describe the effect this has on bank T accounts.
   3. Show the effect of this policy on the AD/AS graph and explain what shifts, and why.

4. This question has several parts.
   1. Use the Bureau of Labor Statistics, the Bureau of Economics Analysis, or the St. Louis FRED database to look up and cite (url) current statistics for the following.

• Unemployment rate
• Rate of inflation
• Government deficit
• Debt to GDP ratio
• Federal funds rate
• Real GDP
• Trade balance
  2. Given the information, identity one policy (fiscal or monetary) you recommend to improve the current situation. Be sure to think about how ALL the variables will be impacted by your policy decision as you think through possible recommendations.
  3. Defend your position by explaining why you’ve made this recommendation and describe any assumptions you’re making.
  4. Use at least one economic model from this quarter to defend your recommendation.
  5. Explain how this recommendation affects each of the variables listed.
  6. Discuss one other policy you considered and explain the thought process you went through to eliminate this other policy.

Answer 1

a) unemployment in u.s is measured by dividing the number of unemployed person by the number of person in the labor Force( employed or unemployed) and multiplying that figure by 100.

b)Labor force participation  rate in u.s is measured of an economy's active workforce. The formula for the number is the sun of all workers who are employed or actively seeking employment divided bye the total noninstitunalized, civilian workage population.

c)1. Structural unemployment: Structural unemployment occurs when there is a disconnect between the skills we have and the skills needed by employers. For example, if someone is an experienced professional in automotive manufacturing, the rise of automation could mean that the skills become obsolete. The resulting unemployment would be considered structural — having to do with the structure of your industry.

2. Cyclical unemployment :  Cyclical unemployment is caused by the contraction phase of the business cycle. That's when the demand for goods and services falls dramatically. It forces businesses to lay off large numbers of workers to cut costs.Cyclical unemployment creates more unemployment. The laid-off workers have less money to buy the goods and services they need. That further lowers demand.

3. Frictional unemployment: It the unemployment which exists in any economy due to people being in the process of moving from one job to another.

d) The actual rate of unemployment is the unemployment rate that would exist in a growing and healthy economy. In other words, the natural rate of unemployment includes only frictional and structural unemployment, and not cyclical unemployment.it affects the acutal unemployment,Because people move from job to job as a regular event, the natural rate of unemployment is generally believed to be greater than zero: There will almost always be some unemployment in the economy. Thus, potential output is not the maximum an economy could theoretically produce, but a lower, sustainable number.

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