ECON 272

In Class Exercise Five - Business Cycles and Unemployment

1.  What are the "three D's" of a downturn in the economy that the NBER studies?

The next 6 questions are about Unemployment Rate Measure -

2.  Non-institutionalized Civilian Population 16 and over can be separated into two categories:

        1.

        2.

3.  Those not in the labor force are comprised of (list 4):

        1.

        2.

        3.

        4.

4.  Those in the labor force are comprised of:

        1.

        2.

5.  For one to be counted as unemployed:

        1.

        2.

6.  The unemployment rate is the number of unemployed as a % of the ___________________.

7.  If the labor force = 100

Employed = 85

Unemployed = 15

a.  What is the unemployment rate?

b.  Now, starting with the above numbers, show how the unemployment rate can decrease without more people actually being employed or working (use numbers!).

8.  What is the employment population ratio (or the employment rate)?  Why is it important?  Why do economists prefer this measurement over the unemployment rate?

9.  Economists believe that zero unemployment is not attainable.  What two types of unemployment contribute to this belief?  Define both.

10.  What is the labor force participation rate and how is it calculated?  What has the rate done (overall) over the last few years?  Do you think that is good or bad?

11.  What questions do you still have about this material?