Question

In: Economics

1) The table below lists the number of people by labor force classification for the country...

1) The table below lists the number of people by labor force classification for the country of Grenyarnia.

Employed

78 million

Unemployed

12 million

Not in the Labor Force

30 million
  1. Calculate the number in the labor force, and the unemployment rate.

  1. Calculate the number in the adult population, and the labor force participation rate.

  1. Suppose 8 million people who were previously employed become discouraged workers. Recalculate the unemployment rate and the labor force participation rate.

  1. Why might a favorable change in the economy, such as technological improvement or a decrease in the price of imported oil, be associated with an increase in frictional unemployment?

Solutions

Expert Solution

(a) Labor force = Employed + Unemployed

Labor force = 78 million + 12 million

Labor force = 90 million

Unemployment rate = (Unemployed / Labor force) * 100

Unemployment rate = (12 million / 90 million) * 100

Unemployment rate = 13.33 %

(b) Adult population = Labor force + Not in the Labor force

Adult population = 90 million + 30 million

Adult population = 120 million

Labor force participation rate = (Labor force / adult population) * 100

Labor force participation rate = (90 million / 120 million) *100

Labor force participation rate = 75%

(c) 8 million people who were previously employed become discouraged workers

New employed = 78 million - 8 million

New employed = 70 million

Labor force = New employed + Unemployed

Labor force = 70 million + 12 million

Labor force = 82 million

Unemployment rate = (Unemployed / Labor force) * 100

Unemployment rate = (12 million / 82 million) * 100

Unemployment rate = 14.63%

Labor force participation rate = (Labor force / adult population) * 100

Labor force participation rate = (82 million / 120 million) *100

Labor force participation rate = 68.33%

(d) a favorable change in the economy, such as technological improvement or a decrease in the price of imported oil, be associated with an increase in frictional unemployment. Even favorable changes involve some type of sectoral shocks which leads to a change in the demand for labor in some firms.

For example,a A decrease in the price of imported oil could reduce the demand for the oil worker and increase the demand for labor in the automobile sector, hence creates frictional unemployment.

Rahul Sunny answered 8 months ago
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