See the attached file for the instructions and needed information.
ECO 509 ECO 502– Analysis of Business Conditions Essay Assignment 1 Dr. Michael S. Miller Directions: Answer both questions. They are worth 25 points each. Length per question: around 1.5 to 3 pages double-spaced would be fine. Longer answers are acceptable as long as the extra length is used to make valid and important points in answering the questions. 1. For this task on the economic way of thinking and economic indicators I have chosen data from the Kingdom of Bahrain; DPU has offered an MBA there for the past 20 years. Below you will find data on employment, wages, real GDP and inflation. I am going to ask you a series of questions that you will answer using these data and some of the essentials of the economic way of thinking. Some additional facts that you should know: · The Bahraini currency is the Bahraini dinar, or BD, and each dinar is worth $2.65. Workers’ paychecks are subject to, essentially, no taxes. · The total population of the island kingdom is roughly 1.7 million · Bahrainis dominate the public sector employment and the private sector is primarily comprised of ex-pats from India, Pakistan, Bangladesh and Philippines. Indicator 2020Q1 2020Q4 2021Q1 Total Employment 743,620 687,700 685,204 Bahraini Employment 156,746 152,678 153757 Non-Bahraini Employment 586,874 535,022 531,447 Monthly Wage, Public Sector BD702 BD705 BD714 Monthly Wage, Private Sector BD441 BD447 BD455 Real GDP in billions of BDs BD3.151 BD3.086 BD3.064 The inflation rate in Bahrain between 2020Q1 and 2021Q1 (year-over-year) was -2.7%; obviously prices fell in general. Lastly, like the U.S., Bahrain was hit by the Covid-19 pandemic during this period. Here are the questions I want you to answer. a) When we look at economic data we do so to elicit signals. First, I want you to define what we in this course call a “direct signal” and what we call and “indirect signal”. Once done take a look at the level of total employment and tell me, for that row, how many direct signals are there? List them and briefly explain why they are direct signals. b) Let’s consider using these same employment figures to draw inferences about real GDP, i.e., an indirect signal. Assume that you have only these total employment figures. Might you be able to draw an inference about what happened to RGDP over the same period based on these labor numbers? Why or why not? If so, what would be your guess as to the direction of change in RGDP over the period? Do the data on RGDP concur with your inference? c) Now take a look at employment during the pandemic on a year-over year basis. Which sector took the biggest hit in absolute and percentage terms over this period? Provide the figures. Does this outcome surprise you or is it what one would expect, given the nature of this labor force? Explain. d) Note the difference between the wages in the public (i.e., government workers) and private sectors and the nationality of those who dominate those sectors. Does this wage gap surprise you? Whether it does or does not, what economic and/or social factors might explain this 60% difference in wage levels? e) Now let’s consider the issue of real versus nominal. Take a look at the wages of the two sectors. Did they rise or fall in nominal terms year-over-year (2020Q1 to 2021Q1) and if so by how much (by sector)? However, what really matters in economics are real values. What were the changes in real wages earned by the two sectors? Explain how you came to this conclusion. f) In part c you will note that the public wage is much greater than the private but the percent changes in wages in real terms were not identical. Speculate on why the wages of the private sector rose more than public in this particular period. 2. Economists have learned that the public often believes things about the economy that are just not true. These misconceptions are not malevolent but rather simply cases of folks not knowing the data. The American labor market is one such indicator that we all have heard about but maybe do not really know. The condition of the labor market is a central focus of Federal Reserve and government policy makers as well as households. Let’s consider the overall condition of the American labor market and see how it stacks up to your preconceptions. For much of this assignment I want you to do three things. One, state what you believe is true about a particular facet of the labor market; this will be your preconception. Two, tell me what is actually true. And three, if the two diverge, tell me why you think you were mistaken. You will not be graded down if you are “wrong” about some aspect of the market. Rather, I will be looking at how clearly you present your analysis using words and/or data. Be aware, labor data are disaggregated by age, sex, education and race. Sensitive matters, these. I am going to ask you some questions that deal with these various categories and I want you to be a disinterested analyst. A good analyst ultimately puts emotions aside and determines what is, not what one wishes were true. Go the website of the Bureau of Labor Statistics, and look at the current summary of the employment situation of the United States (http://www.bls.gov/news.release/pdf/empsit.pdf ) and do the following: a) Tables A, A-2 and A-3 provide unemployment rates by racial/ethnic divisions (White, Black or African American, Hispanic/Latino, Asian) and by age brackets (teenagers, adults). Do the following before looking at the data: do you expect to find differences in unemployment rates for these various racial/ethnic groups and if so, what are those expected differences? Now, looking at the data, tell me, using some basic numbers to make your case, what the data reveal. Were your expectations realized? Why or why not? Now do the same for age. b) Before you access the following table answer this question: state in a sentence or two what would you guess is the relationship or correlation in general between the level of a person’s education and the rate of unemployment of people with that level of education? Why do you think this relationship, if any, exists? Now, look at table A-4. Describe, with some data to make your case, the relationship between educational attainment and unemployment rates. Were your expectations corroborated? c) Before you access the following table answer this question: You know that many workers in the US economy work part-time rather than full-time. In a few sentences tell me what would you guess is behind this work-leisure decision in general: do people work part-time because they want to (what percent of total part-time workers do think want part-time only?) or do they work part-time because that is all they can find? Why do you expect this? Now, look at table A-8 and access the data on how many people work part-time and why. Describe what you find, giving some numbers that tell us why folks work part-time. Were your expectations corroborated? d) Speculate in a few sentences before you answer this question – what percent of employed people in the US do you think are farmers? Now, look again at table A-8. How many people are employed in Agriculture and Related Industries? What percent is this of the total American employment as reported by the household survey (see table A for total employed)? Surprised or not? e) Now I ask you to compare employment in the two different surveys of the labor market. Go to table A-1 (Household) and table B-1 (Establishments) and let me know the following: How many people are employed in Table A-1 versus the number of jobs listed in table B-1? (Note that is A-1 and B-1, not A and B.) Why the difference? f) Lastly, I want you to sum up the condition of the American labor market. First, tell me in a couple of sentences what you think of the labor market. For example, is it strong or weak? Can people find work or is unemployment an issue we should be dealing with? Once done take a look at market summary on the first four pages of the monthly report as well as Tables A and B which set out the basic data on the market of the past twelve months. What story do these two tell and do they match your expectations?