Title
[204] Unit 5 Assignment Template
In this Assignment, you will deal with how to measure the cost of living and rate of unemployment in the economy.
Economists measure prices in the macroeconomy to generate a consumer price index (CPI) and, then employ the CPI to compare dollar figures from different points in time and to adjust interest rates for inflation. This helps measure the change in the cost of living. The labor market is also introduced, and enables us to see how full utilization of labor resources improves the level of production and the standard of living. Economists measure the performance of the labor market using unemployment statistics.
1) Assume there is a simple economy where people consume only two goods, food and clothing. Further assume that the market basket of goods used to compute the CPI consists of 100 units of food and 20 units of clothing.
Yearly Price per Unit
Food
Clothing
2004 price per unit
$8
$20
2005 price per unit
$12
$40
a. Compute the percentage changes in the price of food and the percentage change in the price of clothing between 2004 and 2005.
b. Calculate the percentage change in the CPI between 2004 and 2005.
c. Do you think the CPI price changes affect all consumers in the economy to the same extent? If not, how do you determine who wins and who loses in this particular situation? Explain.
2) Calculate how much each of the following items is worth in terms of today’s dollars using 180 as the price index for today.
a. In 1925, the CPI was 18 and the price of a movie ticket was $0.30.
b. In 1930, the CPI was 14 and a cook earned $20 a week.
c. In 1940, the CPI was 16 and a gallon of gas cost $0.20.
3) The table below uses data for three hypothetical countries. All the number values are in thousands.
a. Complete the following table:
Country
Adult Population
Labor Force
Employed
Unemployed
Unemployment Rate
Labor-Force Participation Rate
A
120,000
60,000
4,500
B
28,000
3,000
60
C
70,000
40,000
10
High rate of unemployment in an economy negatively affects individuals, their families, and a nation as a whole since labor force is a very important productive resource. Based on this background information and the table you completed under 3a, answer the following questions.
b. How does the government officially measure employment and unemployment in the economy? Why is it usually stated that the official unemployment rate likely underestimates the actual level of unemployment in the economy?
c. Based on the table under 3a, describe the relationship between employment and economic well-being in the economy for each country. What are the impacts of labor force utilization and high unemployment rate on the national economy of country A, B, and C?
4) The following table indicates U.S. real GDP data to answer the following questions.
Year
Real GDP (2000 prices) (in millions)
Population (in millions)
1987
$6,435,000
243
2005
$11,092,000
296.6
a. What is the Real GDP per person in 1987?
b. What is the Real GDP per person in 2005?
c. What is the percent change in Real GDP per person between 1987 and 2005?
5) Now that you have segmented the components of macroeconomic aggregates, explain their implications on the national economy. Provide examples based on your answers above and explain how CPI affects consumers, how CPI affects price, the effects of employment and unemployment on the U.S. economy, and how the changes in living standards could affect employees and the national economy.
Page 2 of 3 Unit 5 [BU204]
Page 1 of 3
Unit 5 Assignment: Unemployment and the Cost
of Living
1. Your Assignment should have a cover sheet with the following information:
Your Name
Course Number
Section Number
Date
2. You may submit your Assignment using the Unit 5 Assignment template.
3. Your answers should follow APA formatting by being in double-spaced paragraph format, with
citations to your sources and, at the bottom of your last page, a list of references. Your answers
should also be in Standard English with correct spelling, punctuation, grammar, and style.
4. Respond to the questions in a thorough manner, providing specific examples of concepts, topics,
definitions, and other elements asked for in the questions. Your answers should be highly organized,
logical, and focused.
Assignment
In this Assignment, you will deal with how to measure the cost of living and rate of unemployment in
the economy.
Economists measure prices in the macroeconomy to generate a consumer price index (CPI) and,
then employ the CPI to compare dollar figures from different points in time and to adjust interest rates
for inflation. This helps measure the change in the cost of living. The labor market is also introduced,
and enables us to see how full utilization of labor resources improves the level of production and the
standard of living. Economists measure the performance of the labor market using unemployment
statistics.
This Assignment will assess your knowledge based on the following outcome:
BU204-2: Explain macroeconomic aggregates such as the GDP, inflation rate, unemployment rate,
and their implications on the national economy.
1) Assume there is a simple economy where people consume only two goods, food and clothing.
Further assume that the market basket of goods used to compute the CPI consists of 100 units of
food and 20 units of clothing.
Yearly Price per Unit Food Clothing
2004 price per unit
$8
$20
2005 price per unit
$12
$40
https://kapextmediassl-a.akamaihd.net/business/204/1902C/Assignment_Templates/Unit5_Template.docx
Unit 5 [BU204]
Page 2 of 3
a. Compute the percentage changes in the price of food and the percentage change in the price of
clothing between 2004 and 2005.
b. Calculate the percentage change in the CPI between 2004 and 2005.
c. Do you think the CPI price changes affect all consumers in the economy to the same extent? If
not, how do you determine who wins and who loses in this particular situation? Explain.
2) Calculate how much each of the following items is worth in terms of today’s dollars using 180 as
the price index for today.
a. In 1925, the CPI was 18 and the price of a movie ticket was $0.30.
b. In 1930, the CPI was 14 and a cook earned $20 a week.
c. In 1940, the CPI was 16 and a gallon of gas cost $0.20.
3) The table below uses data for three hypothetical countries. All the number values are in thousands.
a. Complete the following table:
Country Adult
Population
Labor
Force
Employed Unemployed Unemployment
Rate
Labor-Force
Participation
Rate
A 120,000 60,000 4,500
B 28,000 3,000 60
C 70,000 40,000 10
High rate of unemployment in an economy negatively affects individuals, their families, and a nation
as a whole since labor force is a very important productive resource. Based on this background
information and the table you completed under 3a, answer the following questions.
b. How does the government officially measure employment and unemployment in the economy?
Why is it usually stated that the official unemployment rate likely underestimates the actual
level of unemployment in the economy?
c. Based on the table under 3a, describe the relationship between employment and economic
well-being in the economy for each country. What are the impacts of labor force utilization and
high unemployment rate on the national economy of country A, B, and C?
4) The following table indicates U.S. real GDP data to answer the following questions.
Year Real GDP (2000
prices) (in millions)
Population
(in millions)
1987 $6,435,000 243
2005 $11,092,000 296.6
a. What is the Real GDP per person in 1987?
b. What is the Real GDP per person in 2005?
c. What is the percent change in Real GDP per person between 1987 and 2005?
Unit 5 [BU204]
Page 3 of 3
5) Now that you have segmented the components of macroeconomic aggregates, explain their
implications on the national economy. Provide examples based on your answers above and explain
how CPI affects consumers, how CPI affects price, the effects of employment and unemployment on
the U.S. economy, and how the changes in living standards could affect employees and the national
economy.
Directions for Submitting Your Assignment
Before you submit your Assignment, you should save your work on your computer in a location and
with a name that you will remember. Make sure your Assignment is in the appropriate template
provided. Then, when you are ready, you may submit to the Dropbox.
Unit 5 Assignment: Unemployment and the Cost of Living Points
Possible
Points
Earned
Content and Analysis
Problem # 1
Computed the growth rates of prices. (a)
4
Correctly calculated the CPI. (b) 4
Explained the effects of price changes. (c) 5
Problem #2
Computed changes in prices using CPI. (a)
4
Computed changes in prices using CPI. (b) 4
Computed changes in prices using CPI. (c) 4
Problem #3
Complete the missing values in the table. (a)
4
Explained how the government officially measures employment and
unemployment in the economy. Explained why it is usually stated that the
official unemployment rate likely underestimates the actual level of
unemployment in the economy. (b)
4
Described the relationship between employment and economic well-being
in the economy for each country. Described the impacts of labor force
utilization and high unemployment rate on the national economy of
country A, B, and C. (c)
4
Problem #4
Calculate the real GDPs per person and the growth rate.
4
Problem #5
Explained how the changes in the CPI affect average price and
consumers. Described the effects of employment and unemployment on
the U.S. economy. Explained how the changes in the living standard
affect employees and the U.S. economy.
4
Writing style, grammar, and APA formatting. 5
Total 50
