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Mr. Maurer
AP Economics
Name: ________________________
Chapter 27 – Problem Set #1 –
The Business Cycle and Unemployment
1. The unemployment rate in an economy is 8%. The total population is 250 million, and the size of the
civilian labor force is 150 million. What is the number of employed workers in the economy?
2. Identify two criticisms of the way the unemployment rate is calculated?
3. A worker who loses a job at an oil refinery because businesses and consumers are switching to natural
gas as an energy source is an example of which type of unemployment?
4. A worker who has quit one job and is taking 2 weeks off before reporting to a new job is an example of
which type of unemployment?
5. The full-employment rate of unemployment is achieved when…
6. Given the hypothetical data in the table below, calculate the annual rates of growth in real GDP and
real per capita GDP.
Year
Real GDP
Annual Growth
Real GDP
Annual Growth
($ Billions)
(in %)
per capita
(in %)
1
$2,416
$11,785
2
2,472
11,950
3
2,563
12,213
4
2,632
12,421
5
2,724
12,719
6
2,850
12,948
OVER>>>
7. The following table gives statistics on the labor force and total employment during year 1 and year 5.
Make the computations necessary to complete the table. (Population figures are in thousands.)
Labor force
Employed
Unemployed
Year 1
84,889
80,796
Year 5
95,453
87,524
Unemployment rate
a. How is it possible that both employment and unemployment increased?
b. Would you say that year 1 was a year of full employment? Explain.
c. Would you say that year 5 was a year of full employment? Explain.
8. Define the business cycle. Why do some economists prefer the term “business fluctuations” to the term
“business cycle?”
9. What is the natural rate of unemployment? Why is the natural rate of unemployment subject to
revision?
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