# Prices and Unemployment

Principles of Macroeconomics

Homework Assignment II

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Chapter 6- Macroeconomic Measurements, Part I:
Prices and Unemployment

If the CPI is 100 in the base year and 108 in the current year, how much did prices rise between the base year and the current year? (show your work)

a.

8 percent

b.

108 percent

c.

1.08 percent

d.

0.08 percent

e.

80 percent

A market basket is made up of three goods, 10X, 12Y, and 18Z. The prices in the base year are \$1.20, \$2.10, and \$3.25, respectively. The prices in the current year are \$1.44, \$2.23, and \$3.88. What is the approximate consumer price index in the current year?

At the time of Kelsey’s 20 year high school reunion she was earning \$50,000 and the CPI was 120.  Now that it is time for her to attend her 30 year high school reunion, Kelsey’s income has risen to \$97,000 and the CPI is 230.  At her 30 year reunion, can Kelsey rightfully brag that her real income has risen since the last time she saw her former classmates ten years ago?

In an economy with 100 million people, 70 million hold civilian jobs and 19 million are not working but are looking for jobs. What is the unemployment rate ?

Suppose the civilian non-institutional population equals 100,000 persons; the civilian labor force equals 75,000 persons; there are 70,000 employed persons and 5,000 unemployed persons. If 5,000 persons who are currently “not in the labor force” decide to join the civilian labor force, and 3,000 of them are unemployed, then (show your work)

a.

both the unemployment and the employment rate rise.

b.

both the unemployment and the employment rate fall.

c.

the unemployment rate rises and the employment rate falls.

d.

the unemployment rate falls and the employment rate rises.

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