2. The population of Tattoonia is very small. Luis works for pay, full time. Rob

Question

2. The population of Tattoonia is very small. Luis works for pay, full time. Robin works one shift a week as counter help at a fast food restaurant. Sheila is retired. Shawna does not work for pay but is thinking about getting a job and has been flipping through the want ads to see what is available. Bob has given up looking for work, after months of not finding anything. Ana, the only child in the country, is 12 years old. a. How would a household survey, following U.S. methods, classify each person? b. What is the labor force participation rate in Tatoonia? c. What is the unemployment rate in Tatoonia? 3. Using the Chapter 9 Outline (section 3) for this problem would be useful. In the economy of Westeros, autonomous consumption-$250 billion, planned investment-$350 billion, and the wpe, 2/3. a) Using the values above, what is the equation for the consumption function? b) Using the values above, what is the income/spending multiplier? c) Using the values above, what is the equation for aggregate demand (AD)? d) Using the values above, what is the equilibrium level of income (Y) in this economy? e) If the level of planned investment changed to S450 billion, what is the new equilibrium level of income (Y) in this economy?

Explanation / Answer

1a) Luis - employed

Robin- employed

Shawna - unemployed

Bob - voluntarily unemployed

Sheila and Ana are not in the work force

Total population in the country =6

labour force =4

Employed =2 & unemployed=2

c)Unemployment rate= no. Of unemployed persons(those who are actively looking for job) ÷labour force

=(1÷4)=0.25or 25%

b)Labour force participation rate = (number of people actively participating in the labor force )÷working age population

=3÷4 (3 people are actively participating in the labour force as 1 has given up searching for job)

=0.75 or 75%

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