Question

1. In the 1970s, the United States federal government created a Department of Energy. This is a time when the OPEC (Organization of Petroleum Exporting Countries) cartel first became prominent. Identify how this action might have impacted the three major macroeconomic goals of our economy.

2. Suppose you live in a community of 100 people where everyone is able and seeks to work. If 80 people are over 16 years old and 72 of them are employed, what is the unemployment rate in this community?

3. What are the three major types of unemployment? What are their causes?

4. What is the business cycle? Explain the four phases of the business cycle.

5. Suppose a consumer buys 10 units of good X and 20 units of good Y every year. The following table lists the prices of goods X and Y in the years 2005-2007. Assume that these two goods constitute the typical market basket. Calculate the price indices for these years with 2005 as the base year. Comment on the inflation picture for these years.

Year	Good X	Good Y
2005	$3	$6
2006	4	7
2007	4.5	7.5

Answer 1

Answering only the first one as these are separate independent questions.

Creation of Department of Energy might have had following impacts on our macroeconomic goals.

1) Inflation - It aimed to keep OPEC in check, so that a supply shock would not be created resulting in high price of oil and therefore increased inflation.

2) Output - It was aimed at coordinating the overall American energy procurement system so that GDP would not be affected due to unavailability of energy.

3) Employment - DoE looked into how much energy was being produced in US directly and how many people were employed directly by the energy. Also, securing the energy supllies meant it was also protecting employment in other industries.