Suppose that work hours in New Zombie are 200 in year 1 and productivity is $8 per hour worked. What is New Zombie’s real GDP? If work hours increase to 210 in year 2 and productivity rises to $10 per hour, what is New Zombie’s rate of economic growth? Explain why sustained long-term economic growth comes from increases in labor productivity. Why do you think the trend rate of U.S. productivity growth has increased since the earlier 1973–1995 period?
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- Suppose that work hours in New Zombie are 200 in year 1 and productivity is $8 per hour worked. What is New Zombie’s real
GDP ? If work hours increase to 210 in year 2 and productivity rises to $10 per hour, what is New Zombie’s rate ofeconomic growth ? Explain why sustained long-term economic growth comes from increases in labor productivity. Why do you think the trend rate of U.S. productivity growth has increased since the earlier 1973–1995 period?
Hint: The quantity of labor and increases in labor productivity are important sources of economic growth. Between 1953 and 2015, in the US economy the labor force increased from 63 million to 158 million workers. Productivity growth has usually been the more significant factor. To calculate real GDP in a given year you have to multiply hours worked by productivity.
2. Suppose that New Zombie has adopted the framework used by the US Bureau of Labor Statistics to calculate its labor force statistics. Following information is extracted from a database maintained by the country's ministry of labor:(Image normally goes here)
Calculate the
To calculate the unemployment rate you have to use the formula:
Unemployment rate = # of unemployed ÷ labor force × 100%
The BLS is the Bureau of Labor Statistics, an agency within the Department of Labor. The unemployment rate is calculated by taking a random survey of 60,000 households nationwide. (Note: Households are in the survey for four months, out for eight, back in for four, and then out for good. Interviewers use the phone or home visits using laptops.)
The population is divided into three groups:
Group 1 consists of those under age 16 or institutionalized. In this country, if you are under 16 you are expected to be in school. If you are in an institution such as a nursing home or prison you obviously cannot present yourself to the labor market.
Group 2 consists of those “not in labor force”. Examples of individuals who are not in the labor force are full-time college students who are not working, stay at home parents, and retirees.
Group 3 consists of those age 16 and over who are willing and able to work, and actively seeking work (individuals who have demonstrated job search activity within the last four weeks).
So, Group 3 is the labor force. The labor force is simply described as those who are either employed or unemployed. To be counted as unemployed you must be a part of the labor force.
The labor force consists of persons 16 years of age or older who are not in institutions and who are employed, or unemployed but seeking employment. The unemployment rate is defined as the percentage of the labor force that is not employed and is found by taking the number of those unemployed and dividing that number by the labor force. Remember to multiply the result by 100 so you can express this as a percentage. The BLS rounds the number to one decimal point.
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