Macroeconomics Problem Set 4: Labor Market Indicators & Equilibrium Wages, Assignments of Economics

Download Macroeconomics Problem Set 4: Labor Market Indicators & Equilibrium Wages and more Assignments Economics in PDF only on Docsity! 1 ECON 2105H Lastrapes Macroeconomics (Honors) Spring 2006 Problem set 4 1. Go to the Bureau of Labor Statistics web site (www.bls.gov). Under the link to “national employment” you will find a link to the current Employment Situation Summary. a. From Table A of this document, report the following labor market indicators from the household survey (using seasonally adjusted data) for January 2006: i) the working age population (i.e. the non-institutionalized civilian population; ii) the labor force; iii) the unemployment rate; and the iv) the labor force participation rate. What was the annual growth rate of employment from December 2005 to January 2006? b. Suppose that economists estimate the rate of frictional unemployment to be 2.6% and the rate of structural unemployment to be 2.1% in January 2006. What is the natural rate of unemployment and cyclical unemployment rate in January 2006? 2. Suppose you run a widget company. The going wage for a worker is $40 per day, and the price of widgets is $0.50 per widget. Given your current capital stock and technical know-how, workers each day can produce widgets according to the scale below. # workers Total product (widgets/day) 1 100 2 190 3 270 4 340 5 400 6 450 a. To maximize profits, how many workers would you hire per day? Explain your reasoning. b. Suppose the market wage falls to $30 per day. How would this affect your demand for labor? c. Suppose the market wage is $40 but the price of widgets is $0.40. How many workers would you hire? 3. Predict the effects on equilibrium real wages and employment in the US of the following events, assuming that all else is equal. a. New advances in robotics enhance the productivity of the average worker. b. The US government restricts all immigration into the country. c. The labor force participation rate rises. d. Leisure becomes more valuable to households. e. There is a large upward surge in the capital stock. f. The price level rises. (Hint: be careful here.)