Question

1. Find the natural rate of unemployment if each month, 2% of employed workers lose their jobs and 18% of unemployed workers find jobs

Select one:

a. 18%.

b. 16%.

c. 5%.

d. 10%.

2.

GDP in an open economy is $4,600 billion. Consumer expenditures are $3,500 billion, government purchases are $900 billion, and domestic investment is $400 billion. Net exports are:

Select one:

a. -$200 billion

b. +$200 billion

c. +$400 billion

d. -$400 billion

Answer 1

1)

Natural Rate of unemployment = job seperation rate / (job seperation rate + job finding rate)

We can see from the above information that job seperation rate = 2% = 0.02 and job finding rate = 18% = 0.18

Thus, Natural rate of unemployment = 0.02/(0.02 + 0.18) = 0.10 = 10%

So, Natural rate of unemployment = 10%

Hence, the correct answer is (d) 10%

2)

Economy is in equilibrium when Y(GDP) = AE where AE = Aggregate expenditure = C + I + G + NX, C = consumption , I = investment, G = government spending and NX = Net exports

Thus, Y = C + I + G + NX

=> 4600 billion = 3500 billion + 400 billion + 900 billion + NX

=> NX = -200 billion

Thus, Net exports = -200 billion

Hence, the correct answer is (a) -$200 billion