In the economy of Cycladia, the total unemployment rate is equal to 9.0 percent,
ID: 1138788 • Letter: I
Question
In the economy of Cycladia, the total unemployment rate is equal to 9.0 percent, the structural 14 The oyclical ummployment nit egalPercmt loyment rate is 2.1 percent, and the frictional unemployment rate is 4.2 percent A) 1.7 B) 2.7 C) 6.9 D) 4.8 Who would be included in the labor force? A) Michelle, who has become discouraged looking for a job and has quit looking B) Derrick, an unpaid homemaker C) Homer, who is waiting for his new job to start D) None of the above would be included in the labor force. (36-40] The prices and quantities for 2005 and 2006 of country A are listed in the table. The base year is 2005. Country A's CPI basket contains the goods and their weight in 2005. In 2005(base Price Item Taco Salad s6 $6 36)78 A) 68 The cost of country A's CPI market basket in 2005 is S C) 100 D) 101 37. The cost of country A's CPI market basket in 2006 is $ C) 100 D) 101 78 38. The CPl in 2005 is S 63B)78 E) 102 C) 100 D) 101 The CPI in 2006 is S 1095 D, 10 120 B) 1195 D) 110 E) 120 A) 129.5 40. T A) 25 The inflation rate in 2006 is S B) 28 C) 28.5Explanation / Answer
(34) (B)
Cyclical unemployment (%) = Total unemployment - Structural unemployment - Frictional unemployment
= 9 - 2.1 - 4.2
= 2.7
(35) (C)
Homer has already got a job and is waiting for work to start, so is included in labor force.
(36) (B)
Cost of basket in 2005 ($) = 5 x 6 + 8 x 6 = 30 + 48 = 78
(37) (D)
Cost of basket in 2006 ($) = 5 x 9 + 8 x 7 = 45 + 56 = 101
(38) (C)
Base year CPI is always equal to 100.
(39) (A)
CPI (2006) = (Cost of basket, 2006 / Cost of basket, 2005) x 100 = (101 / 78) x 100 = 129.49
(40) (E)
Inflation rate = % Change in CPI = (129.49 / 100) - 1 = 1.2949 - 1 = 0.2949 = 29.49%