Question

2. Problems and Applications Q2 Indicate what happens to the unemployment rate and the labor-force participation rate in each of the following scenarios.

Scenario Effect On...

Unemployment Rate / Labor-Force Participation Rate increases/stays the same/ decreases . increases/stays the same/ decreases

Yakov, a full-time college student, graduates and is immediately employed. Unemployment Rate _______________ Labor-Force Participation Rate ________________

Ana is on maternity leave and will resume working in two months.   Unemployment Rate _______________ Labor-Force Participation Rate ________________

Charles has a birthday, becomes an adult, but has no interest in working.   Unemployment Rate _______________ Labor-Force Participation Rate ________________

Gilberto, a construction worker, dies in an accident at work. Unemployment Rate _______________ Labor-Force Participation Rate ________________

Answer 1

1 When Yakov graduates and is immediately employed, the unemployment rate decreases because the labor force increases, and the labor-force participation rate increases because Yakov was part of the adult population and is now part of the labor force.

2 Ana is on maternity leave and will resume working in two months.   Unemployment Rate remains same and Labor-Force Participation Rate remains same as she was already in the labor force.

3 When Charles becomes an adult but does not look for work, there is no effect on the unemployment rate. The labor-force participation rate decreases because Charles is now part of the adult population but is not part of the labor force.

4 When Gilberto dies working at job, the unemployment rate increases because the labor force decreases, and the labor-force participation rate decreases because the labor force and the adult population both decreased by one.