Question

1. If the frictional rate of unemployment is 1%, the structural rate of unemployment is 2.1%, and the total unemployment rate is 7%, then we can conclude that:

A) the cyclical rate of unemployment is 3.1%.

B) 7% of workers in the labor force are underemployed.

C) the economic growth rate is –7%.

D) the equilibrium rate of unemployment is 3.1%.

2. A seller in a perfectly competitive market cannot

A) decrease the marginal cost.

B) leave the industry.

C) raise the market price of a product.

D) increase the amount he supplies.

3. A rise in population in a country:

A) leads to a downward shift of the aggregate production function.

B) boosts real GDP but not necessarily real GDP per person.

C) always raises the standard of living in a country.

D) leads to an increase in the level of technology in an economy.

Answer 1

1. Answer is “the equilibrium rate of unemployment is 3.1%”

Full employment or equilibrium rate of unemployment is equal to structural + frictional unemployment rate = 1 + 2.1 = 3.1%

2. A seller in a perfectly competitive market cannot “raise the market price of a product.”

This is because the seller in perfectly competitive market is a price taker and have to accept the price prevailing in the market.

3. A rise in population in a country “boosts real GDP but not necessarily real GDP per person”

The rise in population gives rises to Real GDP but may not necessarily gives rise to Real GDP per person as population growth may be higher that Real GDP growth resulting in fall in Real GDP per person.