The natural rate of unemployment when there is a change in the various types of unemployment. Concept Introduction: Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Question

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Answer 1

Question

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

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M” method Given the following model, solve by the method of “M”. (see image)

As indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend. 1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers. 2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.

Answer 2

Question

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

Answer 6

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Answer 7

Chapter 10, Problem 1P

Sub-part

A

To determine

The natural rate of unemployment when there is a change in the various types of unemployment.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Answer 8

Sub-part

A

Expert Solution

Explanation of Solution

The natural unemployment rate is all unemployment other than cyclical. That implies it as the sum of frictional, seasonal, and structural unemployment. So cyclical unemployment is 2% + 2% + 0.5% = 4.5%

The cyclical unemployment rate is zero under natural rate of unemployment. Since the cyclical unemployment is 2%, so the economy is operating at 2% percent less than its potential GDP.

Answer 9

Sub-part

A

Expert Solution

Answer 10

Sub-part

A

Expert Solution

Answer 11

Expert Solution

Answer 12

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Answer 13

Sub-part

B

To determine

The natural rate of unemployment when there is a rise in the cyclical unemployment keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Answer 14

Sub-part

B

Expert Solution

Explanation of Solution

Natural rate of unemployment remains unchanged with cyclical GDP going upto 3%. Since the cyclical unemployment is 3%, so the economy is operating at 3% percent less than its potential GDP.

Answer 15

Sub-part

B

Expert Solution

Answer 16

Sub-part

B

Expert Solution

Answer 17

Expert Solution

Answer 18

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.

Answer 19

Sub-part

C

To determine

The natural rate of unemployment when structural unemployment falls keeping other types of unemployment as unchanged.

Concept Introduction:

Natural Rate of Unemployment: The natural rate of unemployment is the unemployment rate under the equilibrium condition.The natural rate of unemployment is the variation between the number of people who would prefer a job in the current wage rate and the number of people who are able to take that job at the current rate. It includes all type of unemployment other than cyclical unemployment.

Answer 20

Sub-part

C

Expert Solution

Explanation of Solution

Natural rate of unemployment will reduce to 4% as structural unemployment reduces to 1.5% from 2%. Cyclical unemployment remains the same, but natural rate of unemployment is now 45. So it is 0.5 % closer to potential GDP.