1. Suppose the labor force of a country comprises of 5 million employed individu
ID: 1105414 • Letter: 1
Question
1. Suppose the labor force of a country comprises of 5 million employed individuals and 1.1 million unemployed individuals. country? What has been the rate of unemployment in this 2. Suppose the Consumer Price Index rose from 110 in 2014 to 115 in 2015. What has been the inflation rate in this country, during the period 2014-2015? Suppose AD has increased and AS has decreased simultaneously by the same magnitude, as shown in the following figure, through shifting of AD and AS ns output, and answer at#3below: AS2 AD2 AS1 AD1 120_ 115 0 500 600 700 Y (in billions of S) 3. (). What has been the change in the equilibrium price levei? (i). What has been the change in the equilibrium level of output?Explanation / Answer
1.
Rate of unemployment = Unemployed people / Labor force
Rate of unemployment = 1.1/(5+1.1)
Rate of unemployment = 18.03%
2.
Inflation rate = (CPI in 2015 – CPI in 2014)/CPI in 2014 = (115-110)/110
Inflation rate = 4.55%
3.
i.
Old equilibrium price level = $110
New equilibrium price level = $120
Change in equilibrium price level = 120-110 = $10 (increase)
ii.
Old equilibrium output level = 600
New equilibrium output level = 600
Change in equilibrium output level = 600-600 = 0
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