Question

7. What is one problem with the U3 - unemployment rate? Which other metric could we look at instead? 8. What would happen to the price of tuition at universities if the demand for college degrees increased and the accreditation process became more costly?

Answer 1

The U-3 unemployment rate is the officially recognized rate of unemployment, measuring the number of unemployed people as a percentage of the labor force. This is considered the official unemployment rate by the Department of Labor and the one most often cited. This rate includes all those who are unemployed and are seeking employment as well as those classified as U-1 and U-2. The U-3 and U-4 unemployment rate look alike but the portion of the labor force which rests outside this. These labor called discouraged workers.

U-3 unemployment rate includes the whole swath of out-of-work people who are willing and able to take a job but who don't fit the narrow BLS definition of "unemployed. Total unemployed, as a percent of the civilian labor force 7.6% in 201. (source - mankiw).

During the recession, due to the conditions, the one who lost his chance of employment is not covered under U-3. The man who was laid off is not countered under U-3 rate.

When an economy is under recess, the unemployment existing or prevailing is not accounted and not included as a U-3 unemployment and it is the one of the big disadvantage of the U-3 unemployment rate and hence it meeds to be substituted with the U-6 unemployment rate.

For the past 18 years, the difference between the U-3 rate and the U-6 rate ranged between 3 and 4.5 percentage points. Since early 2009 however, at which time the recession had been underway for more than a year, the spread rapidly ballooned to 7 percentage points and has remained at or just below that for the last 3 ½ years, unprecedented since the tracking of the U-6 rate began

The U-6 counts the percentage of people who voluntarily gave up their jobs or stepped aside voluntarily. It also includes the portion who opted for part-time jobs but capable of doing full-time jobs due to the unavailability of resources or lack of employment opportunities.

Why U-3?

the U-3 rate has been a good measure in the past, economic conditions of late have resulted in the official unemployment rate partially masked the true extent of unemployment in the US.

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(8)

Estimating the effect of tuition fee increases on demand for a university education is complicated by the potential endogeneity of tuition fees. The same fees all over the universities making it single type pf fees don't make any change in the demand for the university.

An accreditation is the one which gives the student a better perspective on classes, learning and what is he going to get.

So a rise is not merely affecting the overall benefits a student going to get and a rise in accreditation costs does hurt the student but thee does not influence the price of tuition.

The prices of tuition at the university are fixed and a certain number of scholarships does decide the amount but they can not be hiked purely on the basis of demand except merit.