Macroeconomics 12th Edition by Rudiger Dornbusch ,Stanley Fischer,Richard Startz

Exercise 3

The Great Recession was characterized by an unprecedented rise in long-term employment. To see why this is significant, let us consider the lost income from two hypothetical recessions:
• In Recession A, unemployment rises to 25 percent, with an average unemployment duration of 20 weeks, or 5 months.
• In Recession B, unemployment peaks at only 15 percent, but average unemployment duration is 40 weeks, or 10 months. If the average paycheck is $2,000 per month and the labor force is 1.5 million people, how much income is lost in each recession