Econ 102, Spring 2025

Problem Set 2

1. Between 1980 and 2019, real GDP grew and prices increased, so...

a. nominal GDP decreased.

b. nominal GDP increased less than inflation.
c. nominal GDP increased less than real GDP.
d. nominal GDP increased more than real GDP.
e. none of the above.

2. Which of the following are not counted as unemployed in the U-6 measure of
unemployment?

a. A 15-year old who is looking for a job delivering newspapers a few mornings per
week
b. A marginally attached worker who wants a job, but hasn’t looked actively in the last
four weeks because child care is more expensive than the wage they expect they’ll
get.
c. A recent college grad who is working part time because they can’t find a full-time
job.
d. A person who has stopped looking for work because they believe their skills don’t
match those demanded by potential employers.

3. Suppose the population of the U.S. is 300 million people. Of these, the U.S. Bureau of Labor
Statistics classifies 70 million people as “not surveyed,” 80 million people as not in the labor
force, and 144 million as employed. What is the unemployment rate in this example?

a. 2%
b. 4%
c. 6%
d. 8%
e. 10%

4. Someone experiencing “frictional unemployment” is someone who …

a. would like to work longer hours but is only able to find part-time employment.
b. has decided not to work for a period while attending school.
c. has been searching for a job for an extended period but cannot find a job to match
his or her skills.
d. is temporarily between jobs.
e. has decided to drop out of the labor force.
5. The introduction of compact discs made vinyl records obsolete. To the extent this caused
higher unemployment among workers who had manufactured records, which type of
unemployment was created?

a. Frictional unemployment
b. Efficiency unemployment
c. Underemployment
d. Structural unemployment
e. Cyclical unemployment

6. Which one of the following statements is FALSE?

a. Cyclical unemployment results from economic recessions.

b. Frictional unemployment is a result of people being in transition between jobs.
c. Someone not currently working who has just entered the labor force after
graduating college and is actively seeking his or her first job would not be classified
as unemployed by the U.S. Bureau of Labor Statistics.
d. According to the U.S. Bureau of Labor Statistics, a person who does any work for pay
or profit is classified as employed regardless of how many hours they work.
e. “Discouraged workers” are a subset of people classified by the U.S. Bureau of Labor
Statistics as not in the labor force.

7. Structural unemployment is unemployment that arises …

a. as people are in transition between jobs.

b. because people’s skills, experience, education or location do not match employers’
need.
c. because of a drop in aggregate demand.
d. because of an economic recession.
e. only during economic expansions.

8. Say that the Consumer Price Index is 100 in 2012, 105 in 2013, 107 in 2014, and 108 in 2015.
What is the inflation rate in 2014?

a. 1.87%
b. 1.90%
c. 2.00%
d. 4.76%
e. 5.00%

9. For each of the following cases, write if the person is “employed”, “unemployed”, “not in
the labor force”, or “not in the BLS definition of the population”. In each case, please use
the exact phrase I use here.
a. Someone who is on parental leave from his full-time job. Employed.
 b. Someone who is working one shift per week but actively looking for a full-time job.
Employed.
c. A full-time student who is unavailable to work during the school year, but started
looking through job postings in March for jobs that start in June and hasn’t yet been
able to get any interviews. Not in the labor force.
d. An incarcerated individual. Not in the BLS definition of the population.
e. A person who works part time, but isn’t using the skills they learned in college at their
job. Employed.
f. A person who works 20 hours per week in their family business, but is not paid.
Employed.

10. Consider a country with a population of 350 people. Of these 350 people, 70 are under age
16, 190 are employed in paid work, and 80 are adults who are not doing paid work or
looking for work because they are doing full-time family care, are retired or disabled, or are
in school. The rest are unemployed. There is no military and no one is institutionalized.

a. What is the unemployment rate? Write your answer in percent terms to one decimal
place.
b. What is the labor force participation rate? Write your answer in percent terms to one
decimal place.

11. Consider an economy with six people. Rosa works full-time for pay. Robin works one shift
per week at a fast-food restaurant and wishes she could get more hours. Wendy is retired.
Andrea does not work for pay, but has been sending out resumes to try and find a job. Bob
has given up looking for work after months of not finding anything. Lucas is 3 years old.
(Keep in mind that, since there are only six people in this economy, your unemployment
rates may be bigger than real-world numbers!)
a. What is the unemployment rate in this country? Write your answer in percent terms to
one decimal place.
b. What is the labor force participation rate in this country? Write your answer in percent
terms to one decimal place.
c. What is the U-6 unemployment rate in this country?

12. Use the following table of CPI data for the U.S. to calculate inflation in 2022. Give your
answer in percent terms to one decimal place.

Year CPI
2019 255.652
2020 258.851
2021 270.971
2022 292.613

13. Give your answer in percent terms to one decimal place.

a. What is the (headline, U-3) unemployment rate in January 2025?
b. What is the labor force participation rate in January 2025?
c. What is the U-6 measure of unemployment in January 2025?
d. What is the unemployment rate in Massachusetts in December 2024?