5. Determine whether each of the following statements is true or false. Briefly

Question

5. Determine whether each of the following statements is true or false. Briefly explain why. Note:
Apply the economic definition of unemployed.
a) Some people who are officially unemployed are not in the labor force.
b) Some people in the labor force are not working.
c) Everyone who is not unemployed is in the labor force.
d) Some people who are not working are not unemployed.

6. 11. The consumer bundle contains 20 gallons of fuel, a standard meal at a restaurant, a month of cell phone service.
  price                                      Quantity  
                        2010 2011                    2010         2011
Fuel/ gallon 2.50 2.25 Fuel [gallon           11 400 12100
Standard meal 15.50 18.00 Standard meal           550          525
Cell Service/ month     59.80 70.15 Cell Service / month    950          900
a) Calculate the cost of the consumer bundle in both 2010 and 2011.
b) What is the inflation rate from 2010 to 2011?
c) Compute the nominal GDP for each year.
d) By what percentage did nominal GDP increase between Year 1 and Year 2?
e) Now compute real GDP in Year 2 by using Year 1 prices.
f) By what percentage did real GDP increase between Year 1 and Year 2?

Explanation / Answer

5.

a) Some people who are officially unemployed are in the labor force. As the labor force consists of people who are employed and those who are looking for work or potential labor.

False

b) Some people in the labor force are not working. It is true as the labor force does not just includes the number of employed workers but also the unemployed workers which are looking for a job.

True

c) Everyone who is not unemployed is part of the labor force. This statement is incorrect as there are adults who are not looking for work or choosing not to work so they cannot be classified as unemployed or employed and not part of the labor force.

False

d) Some people who are not working are not unemployed because they are not looking for work which is the criteria to be classified under unemployment. There is also disguised unemployment which is technically not included in unemployed labor.

True

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