Macroeconomics Homework Answer the question with subparts 1.1 Use the following

Question

Macroeconomics Homework
Answer the question with subparts

1.1 Use the following data: total population, 500; population under 16 years of age or institutionalized, 120; not in labor force, 150; unemployed, 23; part-time workers looking for full-time jobs, 10.
a. Calculate the unemployment rate.
b. Calculate the labor participation rate.
c. If 50 workers were not counted in the labor force one month recalculate unemployment and labor force participation.

1.2 Assume only two countries, China and the US. If China decides to stimulate growth through a policy of running a large export trade surplus, does China’s national savings increase? Show the relationship between China’s national savings, domestic investment and net capital outflow (NCO).

1.3 Turning to the US, given China’s trade surplus, why does the US have to run a trade deficit (NX<0) and a net capital account deficit (NCO<0) if China runs a trade surplus?

1.4 Assume that domestic US savings equals domestic US investment, why would you think that in this case the “glut of savings” from China could be destabilizing in the US?

1.5 Suppose autonomous consumption is $500, government spending $1,000, panned investment is $1,250, and net exports are -$250 and the MPC is 0.8. What is the equilibrium value GDP?

1.6 If the marginal propensity to consume is 0.8, by how much will an increase in planned investment spending of $400 billion increase equilibrium real GDP?

Explanation / Answer

A) To find the size of the labor force subtract population under 16 years of age or institutionalized (120) and those not in the labor force (150) from the population (500).

The size of the labor force is 230 = (500 - 120 -150).

The official unemployment rate is the number of individuals unemployed divided by the labor force converted into percentage form.

The unemployment rate for the values above is 10% = ((23/230) x 100).

B) The participation rate refers to the number of people who are either employed or are actively looking for work. The number of people who are no longer actively searching for work would not be included in the participation rate.

(230/500)*100 = 46%

C) Earlier number for labor force = 230

If 50 not conted from the labor then it will be 180

(23/180)*100 = 12.77%

D) If trade surplus is achieved then it will appreciated currency. In this case both savings and investment should increase.

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