Question

2) Unemployment (show all work)

Suppose that country a population of 120 made up of a labour force of 100 and 20 children under the age of 15

1. What is the participation rate?

Eight members of the labour force are unemployed

2. What is the unemployment rate?

Of the eight unemployed 2 worked in a factory that produced pies this factor has closed down and expected to open up after the pandemic.

3. Describe what type of unemployment this is and why?

One of the eight is a sky instructor and has been laid off for the summer

4. Describe what type of unemployment this is and why?

One of the unemployed cannot find a job and gives up looking

5. What is the new unemployment rate?

Answer 1

1. The participation rate refers to the total number of people or individuals who are currently employed or in search of a job.

Participation rate= labor force/ total adult population x 100

= 100/100 x 100 = 100%

2. Labor force= 100, unemployed = 8, employed = 100-8= 92

The unemployment rate is the percentage of the total labor force that is unemployed but actively seeking employment and willing to work.

Unemployment rate= unemployed/ labor force x 100

=8/100 x 100= 8%

3. This is cyclical unemployment. Cyclical unemployment is caused by the contraction phase of the business cycle (set off by the pandemic). That's when the demand for goods and services falls dramatically. It forces businesses to lay off large numbers of workers to cut costs.

4. This is seasonal unemployment. Seasonal unemployment results from regular changes in the season. Workers affected by seasonal unemployment include resort workers, ski instructors, construction workers and ice cream vendors among others.

5. The person who has given up looking is now a discouraged worker and no more part of the labor force.

Number of unemployed now= 7

Since labor force= employed + unemployed, new labor force= 99

New unemployment rate= 7/99 x 100 = 7.07%