Question

3.Following 2 decades of relatively low fertility, the US had a baby boom (sharp increase in fertility) from about 1950 to 1970, then declining fertility since then. [15 points] a.Draw and explain age pyramids for the US in 1990 and 2020. b.What is the NAIRU? What do the letters stand for, and what does it mean in plain English? c.Explain how changes in US fertility over time and the shape of the age pyramids affected the NAIRU in 1990 and 2020.

Answer 1

3)

a) Population pyramids - Population pyraids show the population distribution in a country according to age and gender. These are an effective tool to understand demographic transitions ( population patterns ) of a country.

On Y axis, age groups are there.

On X axis, percentages of population are plotted.

Image sources - populationpyramid

Blue is male , Pink is female

1990

As it can be seen the pyramid is broadest in the age groups near 30 and as age increases it becomes narrower. The percentage of population in age 15 - 30 are important in terms that these are responsible for future births, which decides how the pyramid looks for coming years.

The broad pyramid in age groups near 30 signify the rise in fertility rates which came around 1950 - 1970. As fertility deccreased thereafter, the percentage population from age 30 to 10 can be seen decreasing. It again incerases for age 0-9 because the high percentage of people in age 20-30 give births which lead to increase in population from age 0 - 9.

Gender distribution is more or less equal.

2020 :

In comparison to 1990 pyramid, 2020 pyramid looks more box (rectangle) shaped. This implies stabilised population as there is no sharp rise or decline. The broad age group of 30s in 1990 pyramid hs now shifted to 60s and thus we can see pyramid is a bit broad there. Similiarly the broad age group 0-9 from 1990 has shifted to 30s in 2020, which is again broad. More people can be seen in older age groups which can be attributed to increasing standard of living and better health care. A rise in standard of living can also explain the decreasing population from age 20 to 0 since people prefer less children than earlier.

Gender distribution is more or less equal.

b) NAIRU - Non-Accelerating Inflation Rate of Unemployment

It refers to a level of unemployment, below which inflation ( increase in prices ) is expected to increase.

c)Through the pyramid of 2020 we can say that, US fertility rates post 1990 decreased a bit, then increased a bit and again decreased near 2020. Now in 1990 we can see good percentage of people in working age, while in 2020 we see a even better percentage in working age. If we assume enough employment opportunities were presented, we can infer that a unemployment must be less, could be even below NAIRU levels. The increase in standard of living post 1990 also hints at the same, i.e less levels of unemployment.

No as we saw, NAIRU is unemployment level below which inflation begins to rise. This happens because less unemployment means more people have money and can buy more. This leads to increase in demand hich drives up prices. Thus, inflation.

Thus with falling unemployment, NAIRU must also fall in 1990 and 2020.