Question

Short Answer Questions

1. How is the unemployment rate calculated? What are the conditions to be present to consider someone as unemployed?
2. If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, what is the labor force participation rate? Show your calculation.

3. Explain the relationship between the following:
   1. actual GDP and potential GDP
   2. unemployment rate and natural rate of unemployment

Answer 1

1. Unemployment rate is calculated as follow -(Unemployed people/ labor force)× 100

Unemployment rate is the percentage of the labour force that is jobless .it is a lagging indicator.

2.conditions to be present to consider someone as Unemployed.

Unemployed people are those who are willing and available to work and who have actively sought work within the past four weeks.those with temporary part time or full time jobs are considered employed as are those who perform at least 15 hour of unpaid family work.

3.Labour force =

Unemployed people× unemployed rate

19,00,0000× 4%

760000

Labour force participation rate =( Labour force÷ total population). × 100

(760000 ÷ 500,00,00,000 )× 100

= 0.152

4.relationship between

A) Actual GDP and potential GDP

Potential GDP is the level of production of goods and services that the Economy is capable of it's workforce is fully employed and it's capital stock is fully utilized.actual GDP is the actual output of goods and services.

b) unemployment rate and natural rate of unemployment

Natural rate of unemployment is mainly determined by the Economy's supply side and hence production possibilities and Economic institution.while unemployment rate is calculated by dividing the unemployment rate into labor force.