Question

i) The following headlines had been collected from the newspaper articles regarding 2019-20 (first three quarters):
a) The current income and the expected future income of Indian households are increasing due to continued increase in employment rate in 2019-20 compared to
2018-19.
b) The rate of profitability in the economy from Large and Mid-cap companies have increased to 7.5% from 2.3% in the year before (2018-19). The expected profitability
of most of the projects have made turnaround in the last three quarters of 2019-20 and banks have cut their lending rates. The analyst is hopeful this trend would
continue in the medium term.
c) The global demand has been surging in the last three quarters and the trend may continue.

Use the Keynesian cross framework to show the changes in Planned Expenditure in reaction to each of these news and explain whether and how they result in higher output
or lower output (GDP). Please explain using graphs and economic logic.
ii) The labour force participation rate in 2019-20 in the economy is 52%. Out of the total population of 1 million people in the country 50% are in the working age group. If the unemployment rate is 5%
in this economy,calculate the
a) The total number of people in the labour force.
b) the total number of people employed.

Answer 1

1)is

2.a)We can find labour force from the labour force participation rate

Labour force participation rate = (labour force/ working age population)*100

From the above formula ,labour force= (labour force participation rate/100)* working age population

Working age population is not given. But total population is given. Total population= l million

It is said that 52 percent of the total population is in the working age group . Therefore working age population= 1000000*(52/100)=520000

Labour force participation rate is already given its = 52

Therefore, labour force =(52/100)*520000= 270400

b) labour force includes employee as well as unemployed people

Labour force= employed+ unemployed

We know that unemployed rate is 5

Unemployed rate =( unemployed/labour force)*100

5 = (unemployed people/ 270400)*100

Unemployed people = (5/100)*270400

=13520

( In a more simpler way , inorder to find the number of unemployed people, we just need to find 5 percent of labour force ,270400*(5/100) =13520)

Now, we can find the number of employed people by subtracting the number of unemployed people from labour force.

Total number of people employed = 270400-13520= 256880

* Another approach to find the total number of unemployed people which is very simple.

Its said that, 5 percent of are Unemployed. Which implies that 95 percent ( 100-5=95) of the Labour force are employed. We can find the number of employed by finding the 95 Percent of the labour force.

Total number of employed people= 270400*(95/100)=256880