Chapter 7 Solutions to the Problems in the Textbook: Conceptual Problems: 1.
The rate of unemployment is affected by the frequency, that is, the number of limes that workers become unemployed in a period, and by the duration, that is, the length of the period for which workers are unemployed.
l. a. In depressed industries, the duration of unemployment is likely to be long but the frequency is likely to
be low. Policies to help unemployed workers from these industries find new jobs may include retraining and education programs to enable them to find work in other industries. l. b. Unskilled workers tend to be more frequently unemployed, but the duration of their unemployment is
usually fairly short. On-the-job training or education programs that provide skills to obtain or maintain jobs are often the best strategy for helping these workers? However, such programs are often costly and difficult to implement. 1 c Unemployment in depressed geographical areas tends to be of long duration and low frequency and is often
concentrated in specific industries (very similar to the situation in l.a.). Policies to relocate workers to different geographical areas may not be successful since workers are often reluctant to move ? Thus policy makers gen erally prefer programs designed to attract new industries to an area over programs to relocate workers. 1. d. Teenage unemployment is often of high frequency and short duration. Since teenagers tend to have
few skills and little or no work experience, programs to facilitate the transition into the adult work force are needed? Programs that offer on-the-job training will provide the highest long-term benefits. These
programs tend to be fairly costly, however, which is why some politicians advocate lowering the minimum wage for teenagers instead. 2. The natural unemployment rate is determined by two factors: the duration and frequency of unemployment.
While the duration of unemployment depends primarily on the organization and demographic make-up of the labor force, the availability of unemployment benefits, and the desire of the unemployed to look for better jobs, the frequency of unemployment depends largely on the rate at which new workers enter the work force and on the variability of the demand for labor across different employers? 2. a. It is unclear whether the elimination of unions would serve to reduce the natural rate of unemployment.
The insider-outsider theory of the labor market suggests that firms bargain with unions (the insiders) and are not much concerned with the unemployed (the outsiders). If unions were eliminated, firms would tend to hire unemployed workers at a lower wage rate, thus reducing the natural unemployment rate. On the other hand, unions tend to preserve stable jobs for their members. Eliminating them may lead not only to a reduction in bargaining power for labor in wage negotiations but also to an increase in the natural rate of unemployment. The elimination of labor unions could also serve to eliminate the wage differentials between unionized and non-unionized workers and, in the process, redistribute some income. 2?b? Increased labor force participation of teenagers would al least initially increase the natural rate of
unemployment, since teenagers have a higher frequency of unemployment than older, more experieneed workers. However, as more and more teenagers entered the labor force and more good and stable jobs became available to them, the natural rate of unemployment would start to decline again. But with more people in the labor force, the supply of labor would be higher and wage rates would be driven down, contributing to wage stagnation.
2?c. If aggregate demand fluctuated more, then firms would offer fewer stable jobs and the frequency of
unemployment would increase, increasing the natural rate. This would not only lead to a loss in output and an increase in personal hardship, but it would also put more financial strain on the unemploymenl insurance program? 2?d. An increase in unemployment benefits would make it less urgent for the unemployed to find new jobs.
They would have the option of looking longer for jobs after being laid off and would be less likely to accept undesirable job offers. As the length of their unemployment increased, workers might begin to look less desirable to potential employers who might believe that they lacked either the motivation or qualifications to work hard for them. Therefore the natural rate of unemployment would increase. 2. e. Employers who perceive the minimum wage rate to be above the value of the marginal product of low
skilled workers will not hire such workers. The elimination of the minimum wage rate might induce some firms to hire more low-skilled workers, thus decreasing the natural rate of unemployment. However, the wage rate that these low skilled workers were offered might be well below the amount that would ensure an adequate standard of living? 2. f. If fluctuation in the composition of aggregate demand increased, workers would have to be shifted
from industry to industry more often and this would increase the natural rate of unemployment. However, since skills are not always transferable, resources would have to be devoted to retraining programs.
3. Many unemployed teenagers are new entrants into the labor force and their frequency of unemployment is
higher than that of adult workers? Teenagers1 frequency of entiy into and exit from the labor force
indicates that few of them work at jobs with the promise of high job security. They have little or no training and few job skills and thus tend to hold unattractive jobs. This perpetuates the problem since the jobs they can get do not provide the skills needed to gain better jobs in the future.
While the frequency of unemployment is lower for adults than teenagers, the duration is often highe匚 There are fewer entrants and re-entrants into the work force among adults, who are most often unemployed due to layoffs. Overall, the unemployment rate for adults is much lower than the unemployment rate for teenagers.
4. a. Employers would benefit from a lower minimum wage rate, since they would be able to expand
production by hiring labor at a lower cost. Since the nominal minimum wage rate might no longer be above the value of the marginal product of low skilled or inexperienced workers, the labor of these workers would be more desirable to employers. Therefore teenagers and low skilled job seekers would also benefit. They would get jobs more easily and gain valuable work experience that they otherwise might not have gotten. Since more people would be hired and more output would be produced at a lower price, the whole economy would benefit from a lower inllalion rate and a lower
unemployment rate.
4.b. Those workers who would have been working at jobs paying the existing minimum wage rate might lose
from a decrease in the minimum wage. With a lower minimum wage rate implemented only during the summer months, employers might lay off current workers and replace them with new entrants at a lower cost? Thus the number of displaced workers might increase? 4. c. Obviously, those who would gain from such a policy measure would support it—teenagers, low
skilled workers, and some firms.
5.
It is possible to design a restrictive fiscal and monetaiy policy mix to bring the economy to a long-run equilibrium situation at the natural rate of unemployment and at a zero rate of inflation. However, this
cannot be achieved without an increase in the rate of unemployment in the short run. Therefore a choice has to be made among adjustment paths that differ in their inflation-unemployment mix.
In considering adjustment paths, the benefits of permanently lower inflalion have to be compared with the costs of increased short-term unemployment. The costs of unemployment are loss of output and personal hardship. If inflation can be anticipated only imperfectly, then a redistribution of income and wealth will take place. Some output may be lost as resources are devoted to minimizing a potential loss in purchasing power rather than to actual product io n. However, the cost of perfectly anticipated inflation is minimal. Thus it probably makes little difference whether we have a zero inflation rate or an inflation rate of 3%, as long as a specific long-run goal is established. A positive rate of inflation may actually help in wage and price adjustments, since it allows real wages to adjust more easily to supply shocks.
Most policy makers tend to perceive the cost of inflatio n as lower than the cost of an in crease in unemployment resulting from tough anti-inflation policies? However, the U.S. experience of the early 1980s indicates that tough measures to bring the economy quickly to recovery may be acceptable if inflation reaches the double-digit range. One way to establish a clear inflation goal is for the Fed to follow a monetary growth rule. However, such a rule may not perform well in all situations (for example, in a supply shock). Another option is to maintain discretionary monetary policy along with an independent central bank that has a clear mandate to function as an inflation fighter
6.
The sacrifice ratio is the percentage of output lost for each one- percent reduction in the inflation rate. It is non-zero in the short and medium runs, when output is different from the lull-employment level.
However, in the long run, unemployment always returns to its natural level and therefore the sacrifice ratio is zero.
7. Okunfs law states that a reduction in the unemployment rate of 1 percent will increase the level of output by
2 percent. This relationship allows us to measure the cost to society (in terms of lost production) of a given rate of unemployment.
8. When inflation is perfectly anticipated, then its costs consist primarily of the costs of making price changes
(menu costs) and costs related to the holding of currency, which loses purchasing power. If
【多恩布什版宏观经济学课后答案】第七章.doc
