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ECON1002 Introductory Macroeconomics, Semester 2, 2022 Tutorial Tasks 1 READING GUIDE: REVIEW WEEK 3 LECTURE AND TEXTBOOK CHS 2.5, 5 AND 6. ALSO, READ https://CANVAS.SYDNEY.EDU.AU/COURSES/39797/MODULES/ITEMS/1514631 Key Concepts: Labour demand; labour supply; the labour market, unemployment, Business Cycle, Output Gap, Natural rate. REVIEW OF CONCEPTUAL UNDERSTANDING These are to be attempted before the tutorial. They will not normally be covered in the tutorial, maybe, except for a quick review, time permitting. The answers are typically found in the textbook and lecture notes. 1. How is the unemployment rate measured 2. What are the distinguishing features of the different types of unemployment recognised by economists 3. What are the arguments, for and against, the payment of generous unemployment benefits 4. What is the role of productivity How does it relate to employment and GDP 5. How is the participation rate related to (un)employment 6. What is a classical recession How is this different from a growth recession 7. What is the natural rate of unemployment PRACTICE PROBLEMS (FOR IN-CLASS DISCUSSION) STUDENTS SHOULD BE PREPARED TO PRESENT ANSWERS TO THE PROBLEMS WITH AN ASTERISK (*). N.B. THERE ARE 3 PROBLEMS WITH * THIS WEEK. ANY TWO PROBLEMS WITH * CAN BE CHOSEN FOR STUDENTS TEAM BASED PRESENTATION. 1. Production data for Bob’s Bicycle Factory are as follows. Number of Workers Bikes assembles/day 1 10 2 18 3 24 4 28 5 30 Other than wages, Bob has costs of $100 (for parts and so on) for each bike assembled. a. Bikes sell for $130 each. Find the marginal product and the value of marginal product for each worker (don’t forget about Bob’s cost of parts) b. Make a table showing Bob’s demand curve for labour. c. Repeat part (b) for the case in which bikes sell for $140 each. d. Repeat part (b) for the case in which worker productivity increases by 50 percent. Bikes sell for $130 each. TUTORIAL 4 (Week beginning August 22) ECON1002 Introductory Macroeconomics, Semester 2, 2022 Tutorial Tasks 2 2. For each of the following scenarios, state whether the unemployment is frictional, structural, or cyclical. Justify your answer. a. Ted lost his job when the steel mill closed down. He lacks the skills to work in another industry and so has been unemployed over a year. b. Alice was laid off from her job at the auto plant because the recession reduced the demand for cars. She expects to get her job back when the economy picks up. c. Lance is an unskilled worker who works for local moving companies during their busy seasons. The rest of the year he is unemployed. d. Tao looked for a job for six weeks after finishing college. He turned down a couple of offers because they didn’t let him use the skills he had acquired in university, but now he has a job in the area that he trained for. e. Karen, a software engineer, lost her job when the start-up company she was working for went bankrupt. She interviewed at five companies before accepting a new job in another firm in the same industry. *3. a. Find employment and the real wage in labour market equilibrium. b. Suppose the minimum wage is $50 per day. Find employment and unemployment. Is anyone made better off by the minimum wage Worse off In answering the last part of the question, consider not only workers but employers and other people in the society, such as consumers and taxpayers. c. Repeat part (b), but now assume that a union contract requires that workers be paid $60 per day. d. Repeat part (b), assuming that the minimum wage is $50 per day. However, assume that the cost of complying with government regulations on workplace safety reduces labour demand to ND = 360 2W. *4. From the homepage of the Reserve Bank of Australia (www.rba.gov.au), click the link: http://www.rba.gov.au/statistics/tables/index.html. Scroll down and you will see ‘Output and Labour’ and then ‘Gross Domestic Product and Income – H1’. Download the Excel file. You will see ‘Real GDP’ in the second column. a. Calculate quarterly percentage changes in Real GDP over the period Mar-2007 to Dec-2009 capturing the global financial crisis (GFC). b. Was there a recession in Australia during this period Why or why not c. Repeat this for the period Dec-1989 to Dec-1993. Was there a recession during the period How long was the period of contraction d. How many classical recessions did Australia have since 1959 ECON1002 Introductory Macroeconomics, Semester 2, 2022 Tutorial Tasks 3 e. Evaluate the claim “A classical recession is necessarily a growth recession but the converse is not true”. *5. In each part that follows, use the economic data given to find national saving, private saving, public saving and the national saving rate. (a) Household saving = 200 Business saving = 400 Government purchases of goods and services = 220 Government transfers and interest payments = 125 Tax collections = 225 GDP = 2800 (b) GDP = 6300 Tax collections = 1725 Government transfers and interest payments = 400 Consumption expenditures = 4550 Government budget surplus = 100 (c) Consumption expenditures = 4600 Investment = 1000 Government purchases = 1000 Net exports = 12 Tax collections = 1650 Government transfers and interest payments = 500