[size=11.000000pt]1. Clayland [size=11.000000pt]is a small developing country [size=11.000000pt]under way of a structural transformation[size=11.000000pt].The following shows selected labor statistics during the decade-long period:
                               
                       
                                                                                               

	[size=11.000000pt]1999	[size=11.000000pt]2013
[size=11.000000pt]Estimated natural rate of unemployment	[size=11.000000pt]7.0%	[size=11.000000pt]5.8%
[size=11.000000pt]Increase in job openings (average)	[size=11.000000pt]22,400	[size=11.000000pt]21,200
[size=11.000000pt]Increase in nonfarm payrolls (average)	[size=11.000000pt]22,000	[size=11.000000pt]20,500
[size=11.000000pt]Labor Force Participation Rate	[size=11.000000pt]65.0%	[size=11.000000pt]63.5%
[size=11.000000pt]Average duration of unemployment	[size=11.000000pt]2 weeks	[size=11.000000pt]20 weeks

                                                                                                [size=11.000000pt]How did the natural rate of unemployment in [size=11.000000pt]Clayland [size=11.000000pt]change during the aboveperiod?
                                        [size=11.000000pt]By utilizing the given figures, explain the change in the natural rate ofunemployment in [size=11.000000pt]Clayland [size=11.000000pt]by referring to the frictional unemployment,structural unemployment, discouraged workers, etc.
                                        [size=11.000000pt]Do they all come together to show an improved the labor market condition in[size=11.000000pt]Clayland [size=11.000000pt]during the decade-long period?
                                        [size=11.000000pt]By answering the above questions, comment on the labor market condition in[size=11.000000pt]Clayland[size=11.000000pt]. Write in, totally, less than 200 words.
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                                        [size=11.000000pt]2. The table shows some economic indicators of a closed economy:
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Period 1: 1990-1999	Period 2: 2000-2009
Average nominal interest rate	4%	6%
Average inflation rate	3%	3%
Average economics growth rate	2%	4%

                                       

                                               
•                                                         Using the Quantity Theory of Money, find the implied growth rate of moneysupply and real interest rate in Period 1. State your assumptions.
  
                                                 
•                                                         In fact, in Period 2, the central bank maintained the same growth rate ofmoney supply as that calculated in (a). From the information given, whatshould have happened to the income velocity of money in Period 2?Explain how it relates to the change in the nominal interest rate.
  
                                                 
•                                                         After Period 2, a new Chairman of the central bank will assume duty. Thegeneral public expects him to be an “inflation fighter”.
                                                          How would this affect the expected inflation rate, nominal interest rate, andthe price level right at the end of Period 2? Explain using the ClassicalTheories.
  
  
  
  
  

                                        [size=11.000000pt]3. Suppose [size=11.000000pt]Country A [size=11.000000pt]is a small open economy facing international sanctions fromher major trading partners. Using the Classical Theories, explain the effects onthe real exchange rate and trade balance of [size=11.000000pt]Country A [size=11.000000pt]in the long run