Question

In: Economics

A county with work-eligible population of 110,000 has 75,000 employed and 15,000 unemployed. Calculate the unemployment...

A county with work-eligible population of 110,000 has 75,000 employed and 15,000 unemployed.

Calculate the unemployment rate and the labor force participation rate.

Suppose the natural rate of unemployment is 5%. Calculate the number of people cyclically unemployed.

Expert Solution

Answer- (a) Unemployed People = 15,000

Labour Force = Employed People + Unemployed People

= 75000 + 15000

= 90,000

Labour Force = 90,000

The unemployment rate = (Unemployed / Labor Force) * 100

= (15,000 / 90,000) * 100

= 16.66 %

The unemployment rate is 16.66 %.

The labor force participation rate = (Labor Force / Working age Population) * 100

= (90,000 / 110,000) * 100

= 0.818 * 100

= 81.8 %

The labor force participation rate is 81.8 %.

Answer-(b) Cyclical Unemployment Rate = Unemployment Rate - Frictional Unemployment Rate - Structural Unemployment Rate

(Note : Natural Unemployment Rate is the sum of Frictional Unemployment Rate and Structural Unemployment Rate)

Given, Natural Unemployment Rate = 5 %

Cyclical Unemployment Rate = Unemployment Rate - Natural Unemployment Rate

= 16.66 - 5

= 11.66

Cyclical Unemployment Rate is 11.66 %.

Rahul Sunny answered 1 year ago

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