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PotentialGDPandtheNaturalUnemploymentRateCHAPTER8CHECKPOINTSProblem1Problem2Problem1Checkpoint8.1Checkpoint8.2ClickerversionPracticeProblem1Table1describesaneconomy’sproductionfunctionanddemandforlabor.Table2describesthesupplyoflaborinthiseconomy.Whatareequilibriumemployment,realwagerate,andpotentialGDP?CHECKPOINT8.1SolutionThedemandforlaborisagraphofthefirsttworowsofTable1.ThesupplyoflaborisagraphofthedatainTable2.CHECKPOINT8.1TheproductionfunctionisagraphofthefirsttworowsofTable1.CHECKPOINT8.1Labormarketequilibriumoccurswhentherealwagerateis$30anhourand2billionhoursoflaborareemployed.PotentialGDPistherealGDPproducedbytheequilibriumquantityoflabor(2billionhoursintopfigure).PotentialGDPis$70billion.CHECKPOINT8.1PracticeProblem1Duringthepast50years,Singaporehasexperiencedrapidpopulationgrowthhasrestructureditseconomyseveraltimestoremainattheforefrontofthelatesttechnology.Singaporehasmodestunemploymentbenefits,nominimumwage,andweaklaborunions.DoestheunemploymentthatSingaporeexperiencesariseprimarilyfromjobsearchorjobrationing?CHECKPOINT8.2SolutionSingapore’sunemploymentislikelytoariseprimarilyfromjobsearch.Ofthesourcesofjobrationing(efficiencywages,minimumwages,andunionwages)onlyefficiencywagesapplies.CHECKPOINT8.2PracticeProblem2Duringthepast50years,Singaporehasexperiencedrapidpopulationgrowthhasrestructureditseconomyseveraltimestoremainattheforefrontofthelatesttechnology.Singaporehasmodestunemploymentbenefits,nominimumwage,andweaklaborunions.WhichofthesefactorssuggestthatSingaporehasahighernaturalunemploymentratethantheUnitedStates?WhichofthesefactorssuggestthatSingaporehasalowernaturalunemploymentratethantheUnitedStates?CHECKPOINT8.2SolutionThefactorsthatpointtowardahighernaturalunemploymentrateinSingaporethanintheUnitedStatesareRapidpopulationgrowthandrestructuringtoremainattheforefrontofnewtechnologies.Boththesefactorswillcreatealargeamountofjobsearch,otherthingsremainingthesame.CHECKPOINT8.2ThefactorsthatpointtowardalowernaturalunemploymentrateinSingaporethanintheUnitedStatesareModestunemploymentbenefits,whichwilllimittheamountofjobsearch,andTheabsenceofaminimumwageandweaklaborunions,whichwilllimittheamountofjobrationing.CHECKPOINT8.2StudyPlanProblemSingaporehasexperiencedrapidpopulationgrowth,restructureditseconomyseveraltimes,andhasmodestunemploymentbenefits,nominimumwage,andweaklaborunions.UnemploymentinSingaporearisesmainlyfrom______,butsome______mightarisefrom_______.A. jobrationing;jobsearch;minimumwagesB. jobrationing;jobsearch;unemploymentbenefitsC. j

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