Introductory Macroeconomics, Semester 2, 2022
Tutorial Tasks
Key Concepts: Labour demand; labour supply; the labour market, unemployment,
Business Cycle, Output Gap, Natural rate.
REVIEW OF CONCEPTUAL UNDERSTANDING
These are to be attempted before the tutorial. They will not normally be covered in
the tutorial, maybe, except for a quick review, time permitting. The answers are
typically found in the textbook and lecture notes.
1. How is the unemployment rate measured?
2. What are the distinguishing features of the different types of unemployment
recognised by economists?
3. What are the arguments, for and against, the payment of generous
unemployment benefits?
4. What is the role of productivity? How does it relate to employment and GDP?
5. How is the participation rate related to (un)employment?
6. What is a classical recession? How is this different from a growth recession?
7. What is the natural rate of unemployment?
PRACTICE PROBLEMS (FOR IN-CLASS DISCUSSION)
STUDENTS SHOULD BE PREPARED TO PRESENT ANSWERS TO THE PROBLEMS WITH AN ASTERISK (*).
N.B. THERE ARE 3 PROBLEMS WITH * THIS WEEK. ANY TWO PROBLEMS WITH * CAN BE CHOSEN FOR
STUDENTS TEAM BASED PRESENTATION.
1. Production data for Bob’s Bicycle Factory are as follows.
Number of Workers Bikes assembles/day
1 10
2 18
3 24
4 28
5 30
Other than wages, Bob has costs of $100 (for parts and so on) for each bike
assembled.
a. Bikes sell for $130 each. Find the marginal product and the value of marginal
product for each worker (don’t forget about Bob’s cost of parts)
b. Make a table showing Bob’s demand curve for labour.
c. Repeat part (b) for the case in which bikes sell for $140 each.
d. Repeat part (b) for the case in which worker productivity increases by 50
percent. Bikes sell for $130 each.
TUTORIAL 4
(Week beginning August 22)
ECON1002 Introductory Macroeconomics, Semester 2, 2022
Tutorial Tasks
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2. For each of the following scenarios, state whether the unemployment is frictional,
structural, or cyclical. Justify your answer.
a. Ted lost his job when the steel mill closed down. He lacks the skills to work in
another industry and so has been unemployed over a year.
b. Alice was laid off from her job at the auto plant because the recession reduced
the demand for cars. She expects to get her job back when the economy picks
up.
c. Lance is an unskilled worker who works for local moving companies during
their busy seasons. The rest of the year he is unemployed.
d. Tao looked for a job for six weeks after finishing college. He turned down a
couple of offers because they didn’t let him use the skills he had acquired in
university, but now he has a job in the area that he trained for.
e. Karen, a software engineer, lost her job when the start-up company she was
working for went bankrupt. She interviewed at five companies before
accepting a new job in another firm in the same industry.
*3.
a. Find employment and the real wage in labour market equilibrium.
b. Suppose the minimum wage is $50 per day. Find employment and
unemployment. Is anyone made better off by the minimum wage? Worse off?
In answering the last part of the question, consider not only workers but
employers and other people in the society, such as consumers and taxpayers.
c. Repeat part (b), but now assume that a union contract requires that workers be
paid $60 per day.
d. Repeat part (b), assuming that the minimum wage is $50 per day. However,
assume that the cost of complying with government regulations on workplace
safety reduces labour demand to ND = 360 ? 2W.
*4. From the homepage of the Reserve Bank of Australia (www.rba.gov.au), click
the link: http://www.rba.gov.au/statistics/tables/index.html. Scroll down and
you will see ‘Output and Labour’ and then ‘Gross Domestic Product and Income –
H1’. Download the Excel file. You will see ‘Real GDP’ in the second column.
a. Calculate quarterly percentage changes in Real GDP over the period Mar-2007
to Dec-2009 capturing the global financial crisis (GFC).
b. Was there a recession in Australia during this period? Why or why not?
c. Repeat this for the period Dec-1989 to Dec-1993. Was there a recession
during the period? How long was the period of contraction?
d. How many classical recessions did Australia have since 1959?
ECON1002 Introductory Macroeconomics, Semester 2, 2022
Tutorial Tasks
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e. Evaluate the claim “A classical recession is necessarily a growth recession but
the converse is not true”.
*5. In each part that follows, use the economic data given to find national saving, private
saving, public saving and the national saving rate.
(a)
Household saving = 200
Business saving = 400
Government purchases of goods and services = 220
Government transfers and interest payments = 125
Tax collections = 225
GDP = 2800
(b)
GDP = 6300
Tax collections = 1725
Government transfers and interest payments = 400
Consumption expenditures = 4550
Government budget surplus = 100
(c)
Consumption expenditures = 4600
Investment = 1000
Government purchases = 1000
Net exports = 12
Tax collections = 1650
Government transfers and interest payments = 500