1. Which of the following people would be unemployed according to official statistics? Why?
   1. A person who makes pottery for art fairs while seeking a permanent position as an art professor.
   2. A high school teacher who takes summers off.
   3. A person who always travels for pleasure.
   4. A person who volunteers 20 hours per week at the local hospital.
   5. A person who sells illegal drugs while looking for work as a construction worker.
   6. A person who works for an accounting agency from her home.
   7. A person who works for an accounting agency from her home and is also seeking a new job.
   8. A wife spends five hours working at her husbands business. She is not paid. The rest of her time is spent at home.
   9. Joe lost his job a year ago. He would take a job if one became available, but he hasn’t looked for a job in the past three months.
2. The following table shows the demand and supply of skilled labor at different hourly wages.
   
   
   1. Draw the supply and demand of labor schedules.
   2. What is the wage and quantity of labor at equilibrium?
   3. Suppose, for whatever reason, employers agree not to pay wages less than $10 per hour. What would the new quantity of labor in the market be? Who gains and who loses from this agreement?
   4. Suppose that a unified group of the current workers negotiates with management and reaches an agreement whereby management cannot pay any worker less than $11 per hour. What happens to employment? Will all current workers be happy with this agreement?
3. The government wants to reduce the unemployment rate for young people. The four programs they are considering are
   
   (i) Reduce the minimum wage.
   
   (ii) Offer the firm a subsidy for every young worker hired.
   
   (iii) Provide subsidized housing to young people in their first year on the job.
   
   (iv) Stipulate that unemployment benefits will be an increasing function of the number of years a person has been working, subject to some maximum amount.
   
   Explain how each of these programs would affect unemployment for young people. How would you decide which one to choose?
4. Suppose the government decides to set up a web site to link prospective employers and employees. Employers can post jobs and employees can then send resumes.
   1. How would this affect unemployment?
   2. How would this affect frictional and structural unemployment?
   3. How would this affect the natural rate of unemployment?
   4. Suppose as a by-product of the service, the government is able to pool data on the skill level and experience of employees and the desired skill level and experience demanded by employers. Why would this information be valuable? How could it be used to reduce unemployment?
5. Explain why each of these businesses would have an incentive to pay the efficiency wage.
   1. A garden service which owns 5 trucks which it sends to households who purchase the service.
   2. A fast food restaurant.
   3. A warehouse that uses a complicated computer system to keep track of its inventory.
6. Suppose that in an attempt to reduce unemployment among unskilled workers, and in particular young workers, the government introduces a "training" wage which is below the minimum wage and which can be used to hire new, unskilled workers. This wage would be paid for a period of up to 6 months, at which point the wage would have to be increased to at least the minimum level. Explain how this would reduce unemployment using a supply and demand diagram. Do you think unskilled workers would favor such a policy?
7. Name three policies that could be adopted by a government to reduce the natural rate of unemployment. Who would benefit and who would lose from each policy?
8. Suppose that in the year 2005, the U.S. working-age population is 300 million people, the total labor force is 240 million, and the unemployment rate is 6 percent.
   1. How many people are unemployed?
   2. What is the labor force participation rate in the year 2005?
   3. What is the employment-to-population ratio?
9. Suppose that a significant number of second income earners in the family decide to reduce their weekly work hours. What is the effect on aggregate hours per week? on the employment-to-population ration? on the labor force participation rate? on the unemployment rate? Would you consider this good news for the economy?
10. 1. Fill in the table below which gives historical data for the United States.
       
       
       
    2. Calculate the employment-to-population ratio for 1955 and compare it with the figures given in Table 20.1.
    3. If the employment-to-population ratio for 1996 were the same as in 1955, what would total employment be in 1996, assuming the same 109.7 million for the working-age population?
11. 1. Fill in the table below showing how many people were employed at the mid-point of each decade.
       
       
    2. Suppose the projection for the working-age population in the year 2005 is 153 million. If the unemployment rate and the labor force participation rate are the same in 2005 as they are in 1995, how much employment will there be?
    3. Using the same projection of 153 million for working-age population in 2005, calculate the employment with an unemployment rate of 7.2 percent and a labor force participation rate of 60 percent. Do the same for a labor force participation rate of 70 percent. Which of these estimates do you think is more realistic? Why?
12. Various projections have been made about the size of the labor force in the year 2005. These projections are contingent on estimates of the participation rates of various demographic groups and estimates for net immigration. Based on the scenario in the table below, calculate total employment and the employment-to-population ratio.