Homework 3: Chapters 28-29

Name: Mason Kozac Class: ECO2013-20221-1V-M-006

Date: 9/22/21

This assignment relates to following learning outcomes:

 calculate real GDP, the rate of economic growth, and labor productivity
 explain why the trend rate of U.S. productivity growth has increased since the
earlier 1973–1995 period
 calculate unemployment rate, labor force, GDP and Consumer Price Indexes,
nominal and real interest rates

Follow the instructions below to complete the assignment.

Instructions

Once you’ve watched the video: The Labor Market - The Economic Lowdown Video
Series, Episode 4, reviewed website: The Bureau of Labor Statistics of the U.S.
Department of Labor (BLS), read Chapter 28: Economic Growth and Chapter 29:
Business Cycles, Unemployment, and Inflation then read following problem(s) and find
the solution(s).

1. Suppose that work hours in New Zombie are 200 in year 1 and productivity is $8
per hour worked. What is New Zombie’s real GDP? If work hours increase to 210
in year 2 and productivity rises to $10 per hour, what is New Zombie’s rate of
economic growth? Explain why sustained long-term economic growth comes
from increases in labor productivity. Why do you think the trend rate of U.S.
productivity growth has increased since the earlier 1973–1995 period?
Year 1 real GDP: $1600
Year 2 GDP: $2100
Rate of Growth: 31.25%
I believe that the productivity growth increased because that is when technological
evolution and growth started to largely boom in the U.S.
The quantity of labor and increases in labor productivity are important sources of
economic growth. Between 1953 and 2015, in the US economy the labor force
increased from 63 million to 158 million workers. Productivity growth has usually

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 been the more significant factor. To calculate real GDP in a given year you have
to multiply hours worked by productivity.

2. Suppose that New Zombie has adopted the framework used by the US Bureau of
Labor Statistics to calculate its labor force statistics. Following information is
extracted from a database maintained by the country's ministry of labor:
Total population 24,512,311
Military personnel 98,539
People below 16 years of age 4,240,102
People in elderly care centers 1,232,130
People who didn't look for job in last 4 weeks 831,304
Housewives whose sole activity is 3,424,204
homemaking
Volunteers 313,200
Employed people by major industries 8,715,690
Self-employed people 3,423,042

People who are jobless, actively looking for a 2,234,100

job, and available for work

Calculate the unemployment rate and the labor force of New Zombie. Show your
calculation. (See next page for the formula and directions for this problem).
Unemployment Rate:12.34%
Explanation -
TCNIP=18,941,540
LF=18,110,236

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To calculate the unemployment rate, you have to use the formula:
Unemployment rate = # of unemployed ÷ labor force × 100%
Labor Force is calculated using the formula (s) given below
Labor Force = Total Civilian Non-Institutional Population – People Who Did not
Search for Job in Last 4 Weeks – Volunteers - House wives
Total Civilian Non-Institutional Population = Total Population -People Below the
Age of 16 yeas – Military Personal - People in Elderly Care Centers
The BLS is the Bureau of Labor Statistics, an agency within the Department of Labor.
The unemployment rate is calculated by taking a random survey of 60,000 households
nationwide. (Note: Households are in the survey for four months, out for eight, back in
for four, and then out for good. Interviewers use the phone or home visits using
laptops.)
The population is divided into three groups:
Group 1 consists of those under age 16 or institutionalized. In this country, if you are
under 16 you are expected to be in school. If you are in an institution such as a nursing
home or prison you obviously cannot present yourself to the labor market.
Group 2 consists of those “not in labor force”. Examples of individuals who are not in
the labor force are full-time college students who are not working, stay at home parents,
and retirees.
Group 3 consists of those age 16 and over who are willing and able to work, and
actively seeking work (individuals who have demonstrated job search activity within the
last four weeks).
So, Group 3 is the labor force. The labor force is simply described as those who are
either employed or unemployed. To be counted as unemployed you must be a part of
the labor force.
The labor force consists of persons 16 years of age or older who are not in institutions
and who are employed, or unemployed but seeking employment. The unemployment
rate is defined as the percentage of the labor force that is not employed and is found by
taking the number of those unemployed and dividing that number by the labor force.
Remember to multiply the result by 100 so you can express this as a percentage. The
BLS rounds the number to one decimal point.