EBK PRINCIPLES OF MACROECONOMICS
EBK PRINCIPLES OF MACROECONOMICS
7th Edition
ISBN: 9781337342155
Author: Mankiw
Publisher: CENGAGE LEARNING - CONSIGNMENT
Question
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Chapter 15, Problem 1QR
To determine

Computation of labor force, unemployment rate, and labor force participation rate.

Expert Solution & Answer
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Explanation of Solution

Measuring unemployment is done by BLS (Bureau of Labor Statistics), which is a part of the Department of Labor. The BLS categorizes all the adults in three groups. They are employed, unemployed, and labor force.

Labor force: Labor force consists of all employed and unemployed workers.

Unemployment rate: Unemployment rate refers to the percentage of unemployed people to the labor force. Unemployment is a situation that occurs in an economy when the able and willing person cannot find any work or job. However, these people are keenly seeking for jobs. Unemployment can be calculated as follows:

Unemployment rate=Number of unemployedLabor force×100

Labor force participation rate: Labor force participation rate refers to the number of individuals who are actively working or looking for a job. This can be calculated by using the following formula:

Labor force participation rate=Labor forceWorking age popultion×100

Economics Concept Introduction

Concept introduction:

Unemployment: Unemployment refers to a situation where the workers are ready to offer their labor at the existing market wage rate and are actively searching for a job but fail to find a job. It is the situation where the market fails to absorb the whole labor force.

Labor force: Labor force refers to the sum of employed and unemployed workers in an economy.

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3. Consider the following regression equation, where Cigs is daily spending on cigarettes in poundssterling (£), Y earsEduc is years of education, and F emale equals one if an individual is femaleand zero otherwise (standard errors in parentheses):Cigs [ = 4(1.6)− 0.08(0.032)Y earsEduc − 0.5(0.2)F emale,(a) Interpret the coefficients on Y earsEduc and F emale. (b) What does the model predict the average daily spending on cigarettes would be for womenwith 12 years of education? (c) Form the 95% confidence interval for the coefficient on F emale. (d) Economists are often interested in estimating production functions of the Cobb-Douglas form(Yiis the ith firm’s output, Liits spending on labour, and Kiits spending on capital):Yi = ALαi Kβi,How might someone estimate α and β from this equation using linear regression?
2. The demand and supply functions for two interdependent goods X and Y are givenbyQDX = 7 − 4PX + 2PYQSX = −6 + 4PX − PYQDY = 1 + PX − PYQSY = −4 − PX + 2PY(a) Find the market equilibrium condition for each good. (b) Express the equilibrium conditions in the matrix form Ax = b.(c) Find the inverse of matrix A. (d) Given your result in part (c), calculate the equilibrium prices. (e) What is the equilibrium quantity for goods X and Y ?
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