UNIVERSITY OF GUYANA
FACLTY OF SOCIAL SCIENCES
ACADEMIC YEAR 2019/2020 (Semester II)
DEPARTMENT OF ECONOMICS
ECN 1200- INTRODUCTION TO MICROECONOMICS
Week Three: Exercise
Question 1
Find the suitable concepts which match the following definitions as it relates to unemployment theory.
(a) A measure of the level of economic activity in a population being the number of people in or
seeking work as a proportion of the total working-age population.
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(b) A type of unemployment that is short-lived and occurs as people change jobs and may be out of
work for a few weeks while they do so. ___________________________________
(c) A form of employment that involves working a contracted number of hours, normally exceeding
40, spread over five days each week. ________________________________
(d) A type of unemployment that occurs for several months of each year in industries such as
farming, constructions and tourism, because of changes in weather patterns and consumer
demand. ___________________________________
(e) Widespread, demand-deficient unemployment associated with economic
recessions.______________________________________
(f) The term used to describe any unemployment caused by people deciding they would rather not
be in work.__________________________________
(g) Unemployment caused by changes in the industrial structure of an economy during which entire
industries may decline and close due to a permanent fall in demand for their goods or services.
Workers displaced from these industries often face long-term unemployment because they have
old and out-of-date skills no longer required by modern industries.
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Question 2
Discuss two possible advantages for an economy if unemployment falls.
Advantage 1:
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Discussion:____________________________________________________________________________
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Advantage 2:
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Discussion:____________________________________________________________________________
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Question 3
(a) Define the term ‘Fiscal Policy’
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(b) Discuss the fiscal cost to government as a result of unemployment.
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Question 4
Refer to the information in the table below
Employed 14,000 people
Unemployed 3,000 people
Not in the labour Force 4,000 people
(a) The labour force is
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(b) The unemployment rate is
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(c) The labour force participation rate is
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(d) The employment rate is
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Question 5
Refer to the table below
Labour force participation rate 75%
Total population 16 years of age and older 200 million
Unemployment Rate 10%
(a) The labour force is
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(b) The total number of people unemployed is
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(c) The total number of people employed is
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Question 6
There are three explanations why wages do not fall when there is an excess supply of
labour. The three explanations are:
1) Minimum wages
2) Insiders versus outsiders
3) Efficiency wages
Discuss ANY TWO.
Explanation 1:
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Explanation 2:
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Question 7
(a) With the use well labelled diagrams, explain these two cause of inflation in an economy.
Demand Pull Inflation as shown on the graph.
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Cost Push Inflation as shown on the graph.
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THE END
