School of Business Department of Economics BECO 260 Work Sheet 1 Problem 1 Parts A and B are independent Part A The table below shows the market basket bought by a typical household. 2008 2009 Item Quantity Price Price Movie tickets 4 $5.00 $7.50 Bags of popcorn 2 $3.00 $3.00 Drinks of soda 4 $1.00 $1.50 a. b. c. d. What is the cost of the market basket in 2008 the base year? Given that 2008 is the base year calculate the CPI in 2009. What is the percentage change in prices between 2008 and 2009? Interpret your answer. By how much should this household 2009 annual income change to keep up with inflation between 2008 and 2009? Part B A movie ticket had cost of 50 cents in 1970. The CPI in 1970 and 2011 was 38.8 and 218.8. How much money would you have needed in 2011 to buy a movie ticket? Problem 2 Given the following data about a CPI basket made of 2 goods: Gun and Apples. Year 1999 2000 Price of a Gun $50 $60 Quantity of Guns 3 3 Price of Apple $0.50 $0.75 Quantity of Apples 1000 100 a. Calculate the cost of the CPI basket in the years: 1999, and 2000? b. Given that 1999 is the base year, what is the CPI for 1999, and 2000? c. Find the level of inflation between 1999 and 2000. School of Business Department of Economics Problem 3 Sara, who works in the banking industry, earned $60,000 annual salary in 2010 and is used to buying the goods mentioned in the market basket below Market Basket Quantity Prices in 2009 Prices in 2010 Prices in 2011 Perfume 6 $50 $80 $100 Dresses 15 $100 $100 $200 Pairs of shoes 10 $50 $40 $70 a. b. c. d. How much does Sara spend on the market basket in year 2010? Assuming that year 2009 is the base year, calculate CPI in 2009, 2010, and 2011. What is the percentage change in price level between 2010 and 2011? By how much should Sara’s 2010 annual income change to keep up with what happened between 2010 and 2011? e. Calculate Sara’s Real income in 2011 if her income kept up with inflation that occurred between 2010 and 2011. Problem 4 Mr. Brown got an annual income of $80,000 in year 2009 and after the increase in price levels in 2010, he got an income increase of 15 percent. The consumer price indices were 80 and 95 in years 2009 and 2010 respectively. a. What is Mr. Brown’s Real income in year 2009? b. How much did Mr. Brown’s income become after the income increase in 2010? c. Did Mr. Brown’s income keep with inflation that occurred between 2009 and 2010? If not, how much should his income increase to keep with inflation? School of Business Department of Economics Problem 5 Parts A and B are independent Part A Given the following: Working-Age Population 300000 Employment Unemployment Unemployment Rate 4.0% Labor Force Labor Force Participation Rate 60% Calculate the missing factors and complete the table. Part B Indicate for each case if it refers to an employed or unemployed person iImad is ill and left his job until he recovers ii- Sahar is a business graduate and searching for a job vacancy iii- Jalal works at his father’s farm for 5 hours for 4 days/week Problem 6 Fadi graduated in 2014 and he started looking for a job. Last week he read the following information: The number of unemployed is 2,450,000 The labor force is 15,000,000 Working age population is 18,540,000 Calculate the following: a. Number of employed b. Unemployment rate c. Fadi noticed lately that foreign investment increased and about 125,000 vacancies were created and filled by unemployed people. Calculate the new unemployment rate. d. Calculate the number of people who are not in the labor force. School of Business Department of Economics Problem 7 Refer to the information provided in the following table to answer parts (a, b, c) a. b. c. Calculate the labor force. What is the total number of people unemployed? What is the total number of people employed? Problem 8 Consider the following labor force statistics for an economy Total population: 1,000,000 Number of adults employed: 600,000 Number of adults’ unemployed and looking for work: 50,000 Number of adults unemployed and not looking for work: 100,000 a. b. Calculate the unemployment rate for this economy After an economic boom, 20,000 new jobs were created, all of which are filled by adults who were previously unemployed but looking for work. Calculate the new unemployment rate. c. Now the stock market crashes and the boom turn into a recession. Total employment falls to 520,000. All the fired workers give up hope of finding another job and decide to emigrate. So the number of people unemployed but looking for work remains at 30000 as in part 2. What is the new unemployment rate? School of Business Department of Economics Problem 9 A- Calculate the required rates in each of the following givens 1- In the year 2000, the working age population in Lebanon was 3,870,600, the total number of employed persons was 2,742,200, and the rate of unemployment was 9.2%. What was the participation rate in the labor force? 2- In the year 1995, the working age population in Lebanon was 3,870,600, not in the labor force were 1,501,700 people, and the total number of employed people was 1,500,200. What was the unemployment rate in 1995? B- Indicate without explaining whether each of the following people is frictionally unemployed, structurally unemployed, cyclically unemployed, not included in the unemployment rate 1- Kimberly voluntarily quit her job as an insurance agent to return to school full-time to earn an MBA degree. With degree in hand she is now searching for a position in management. 2- Assume that Hernandez is temporarily unemployed because he has voluntarily quit his job with company A and will begin a better job next week with company B. 3- Kristen has lost her job in a Florida textile plant because of import competition. She intends to take a short course in electronics and move to California where she anticipates that a new job will be available. 4- Rami lost his job after the severe decline in the construction sector. 5- Mona decided to quit her job and stay with her new born Son.