Question Business Management

Q

Short Answer Questions:

1) (4 marks in total)Computevariable indicators of unemployment using the following information. Please show all of your working. If you do not, you will receive zero marks for the question(s).

Demographic Group Number of Residents Full-time workers 7000 Part-time workers 2000 Unemployed and looking for work 600

Unemployed and not looking for work due to discouragement over job prospects 500 Not working due to disability 300

Not working due to retirement 900

Under the age of 16 3000

Total Population 14300 a) (1 mark) What is the size of the labour force in this economy?

b) (1 mark) Calculate the Labour Force Participation Rate for this economy. Report as a percentage to two decimal places.

c) (1 mark) Calculate the Unemployment Rate for this economy. Report as a percentage to two decimal places.

d) (1 mark) Suppose that the natural rate of unemployment is considered to be 5%. What is the rate of cyclical unemployment? Report as a percentage to two decimal places.

  2) (4 marks in total) Below you can find out the per capita real GDP of the 13 countries who have joined the European Union (EU), and the EU average in 1999(both in Column A). Italso gives the GDP per capital growth rates in 2000 (Column B). Let us assume that countries will keepgrowing at the given rates until these countries reach the level of the EU average. Answer the following questions and explain your answers and show all of your working (in order to obtain partial marks).

Country Real GDP per capita in 1999 (before joining EU) Growth rate

of GDP per capita in 2000 (%) Ratio of per capital GDP to EU average in 1999 Years to

double this ratio (A) (B) (C) (D)

EU average $25,660 2.7 1 - Hungary (joined 2004) $5218 4.8 (Q2 b) (Q2 b)

The Czech Rep. (joined 2004) $5170 1.5 0.2015 - Poland(joined 2004) $4257 5.7 0.1659 - Slovenia(joined 2004) $9994 3.6 0.3895 77.8

Malta(joined 2004) $13,025 4.1 0.5076 50.0 Romania(joined 2007) $2,323 7.3 0.0905 15.2 Bulgaria(joined 2007) $1,691 4.0 0.0659 53.9 Lithuania(joined 2004) $3,420 4.3 0.1333 43.8 Latvia(joined 2004) $3,092 3.6 0.1205 77.8 Slovakia(joined 2004) $3,818 5.0 0.1488 30.4

Turkey(pending) $6,230 2.9 0.2428 350

a) (1 mark) Just observing the above table (doing no calculations), are there any countries that will not be able to catch up to the level of per capita income in the EU based upon the assumption we have made?

b) (2 marks) Fill in the information for Column C and D in the above table for Hungary (where it is marked as Q2b). And then, using the Rule of 70 from the textbook, how many years will the ratio of Hungary's GDP to EU average GDP take to double (hint: the growth rate of a fraction is approximately equal to the growth rate of the numerator minus the growth rate of the denominator)? How many years do you think it will eventually take real GDP per capita of Hungary to reach that of EU average?

c) (1 mark) The above calculation in part b) is based on the assumption that a country's real GDP grows at a constant rate. But in reality it does not. Why is that?