BC Economics Worksheet
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ECON202
Homework 2
1. Historically, young French workers (under age 25) have had relatively high
unemployment rates: 21 percent in 2005. In 2006, the French government proposed to
allow employers to fire young employees without cause (a labor restriction). How
should this policy improve employment prospects for young French workers? What
would the impact on their wages be?
2. Using the bathtub model of unemployment, calculate the natural rate of
unemployment in 2015 and 2016.
Separation Finding Labor
rate
rate
force
2015
2%
20%
130
2016
2.5%
15%
100
3. In 1979, in the face of rising competition in the fast-food hamburger market,
McDonalds reduced the price of its cheeseburger to $0.43. If the CPI in 1979 was
37.2 and the CPI in 2005 was 100, what is the price of a 1979 cheeseburger in 2005
dollars?
4. You are the head of the central bank and you want to maintain 2 percent long-run
inflation, using the quantity theory of money. If the real GDP growth is 4 percent and
velocity is constant, what must the growth rate of money be to the inflation target?
5. This table displays the United States potential and actual output for six select months
between 1960 and 2012. Calculate short-run output for each period. In which
year/month does the economy have the largest boom? Largest recession?
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Tags:
economics
labor market
policy targeted
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