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Chapter 10: Problem 333

When GNP grows by \(3.5 \%\), the labor productivity by \(1.6 \%\) and the labor force by \(2.2 \%\) per year, is unemployment increasing or decreasing?

Short Answer

Expert verified
Unemployment is increasing, as the total GNP growth (3.8%) calculated from labor productivity growth (1.6%) and labor force growth (2.2%) is greater than the actual GNP growth rate given (3.5%).

Step by step solution

01

Understand the given information

We are given the following information: 1. GNP grows by 3.5% per year 2. Labor productivity grows by 1.6% per year 3. Labor force grows by 2.2% per year
02

Calculate the total growth of GNP due to labor productivity and labor force growth

To determine the total growth of GNP due to labor productivity and labor force growth, we need to add the growth rates of each factor. Total GNP growth = Labor productivity growth + Labor force growth Total GNP growth = 1.6% + 2.2%
03

Compare the total GNP growth with the actual GNP growth

Now we will compare the total GNP growth calculated in Step 2 with the actual GNP growth provided (3.5%). Total GNP growth = 1.6% + 2.2% = 3.8%
04

Determine if unemployment is increasing or decreasing

Since the calculated total GNP growth (3.8%) is greater than the actual GNP growth rate given (3.5%), the labor force is growing at a faster rate compared to the growth in GNP and labor productivity. Therefore, in this scenario, unemployment is increasing.

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Most popular questions from this chapter

What is the consequence of unanticipated inflation? Explain and give an example.

Suppose that real GNP doubles while the quantity of money increase by \(80 \%\). If the velocity of money is constant, what happens to the price level?

Elaborate on the following statement: "Inflation also casts its evil eye upon savers". Give an example to make your point clear.

Keynesians, in defense of the Phillips curve, have contended that in the late \(1960^{\prime}\) s and in the \(1970^{\prime}\) s the Phillips curve has shifted to the right. What could have caused such a shift?

What are some of the ways for government, business and the consumer to halt or control inflation?
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