ACJC Suggested Answers Intro to Macroeconomics Tutorial Worksheet

1 © ACJC/Economics Department ANGLO-CHINESE JUNIOR COLLEGE JC1 Economics H2 Introduction to Macroeconomics Tutorial Worksheet 5 Question 1 Table 1: Selected US economic indicators from 2009 – 2014 2009 2010 2011 2012 2013 2014 Real GDP (% change) -2.8 2.5 1.6 2.3 2.2 2.4 Unemployment rate (%) 9.3 9.6 8.9 8.1 7.4 6.2 Labour Force (Millions) 154.2 153.8 153.6 154.9 155.4 155.9 Inflation rate (%) -0.4 1.6 3.2 2.1 1.5 1.6 Source: World Bank, US Bureau of Labour Statistics Suggested answers: (a) (i) State the formula to calculate unemployment rate. UnN rate is calculated by taking the total no. of unemployed divide by the total labour force X 100% [1] (ii) Explain why ‘retirees’ are NOT considered as unemployed. Unemployed ➔ they are willing and able to work and are actively looking for jobs, but are not able to find a job - Must be part of the labour force to begin with [2] Section A: Data Response Questions

2 © ACJC/Economics Department Retirees ➔ NOT willing nor able to work, so are not actively looking for job ➔ not part of the labour force ➔ hence not considered as unemployed even though they do not work. (b) Describe the trend of General Price Level in the US from 2009 to 2014. • (General trend) From 2009 to 2014, general price level in the US has been rising. • (Refinement) There was a fall in general price level in 2009. [2] (c) Compare the trend of unemployment rate and inflation rate in the US from 2011 to 2014. • (Similarity) Between 2011 and 2014, both unemployment rate and inflation rate in US reflect generally decreasing trends. • (Difference) Unemployment rate has been consistently decreasing while inflation rate experienced an increase from 2013 to 2014. [2] (d) Explain what the trend of unemployment rate from 2011 to 2014 suggests about the overall performance of the US economy across the years. Hint: link to the total production of output within the country. Unemployment rate falling ➔ suggests higher utilization of labour resource (1m) A country is now able to produce more output (1m) since more labour resource are hired ➔ economic performance improved / better since there is a fall in unN over the years. (1m) Students should also note that economic performance is tied closely to standard of living: The higher the economic performance, each citizen / resident is also able to consume more goods and services and also earn higher per capita income *assuming no change in population. Therefore, material SOL improved. [3]

3 © ACJC/Economics Department Question 2 Table 2: Percentage change in real gross domestic product (GDP) 2009 2010 2011 2012 2013 Japan -5.5 4.7 -0.5 1.8 1.6 USA -2.8 2.5 1.6 2.3 2.2 China 9.2 10.6 9.5 7.8 7.7 Germany -5.6 4.1 3.6 0.4 0.1 Source: World Bank, OECD Statistics Table 3