China Essay

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Problem Set 5 1) What is the “rate of unemployment”, what components does it consists of, and how is it calculated? What happened to this rate in Australia during 1970-1983, and during 1992-2007? Give at least two reasons for the observed trends in each period. The rate of unemployment refers to the percentage of the labour force that is unemployed. The unemployment rate consists of the labour force and number of people actively seeking work whom are unemployed within the labour force. The unemployment rate is calculated by :The number of employed x100 / Labour force. Between 1970 and 1983 there was a rise in this rate that peaked around 10%; this rise could have been attributed due to weak economic conditions that did not produce enough jobs for the supply of labour. From 1992 to 2007, Australia saw a gradual decline in the unemployment rate most likely due to prosperous economic conditions facilitating strong jobs growth. 2) Based on reading the chapter and our lecture discussions, you should be able to identify an “error” in Figure 11.2 (page 247). Explain what the error is and re-draw the graph to fix it(just roughly to demonstrate the point). 3) The Labour Force Survey (LFS) conducted by the Australian Bureau of Statistics (ABS) counts someone who works as little as one hour per week as “employed”. What are the implications of this for the accuracy of the calculated rate of unemployment? The LFS limits the accuracy of the calculation of the unemployment rate because it results in the issue of “underemployment” or “underutilisation” meaning that people are able and willing to work more hours, however are unable to do so due to the lack of demand from firms for workers to work additional hours. 4) Suppose a firm decides to pay its employees “efficiency wages” that are much higher than in other comparable firms. What may be the reasons for this and

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