Arthur, the ruler of Avalon, has asked for your help with the economy of his country....

Arthur, the ruler of Avalon, has asked for your help with the economy of his country. Arthur's economic minister provides you with the following information:

Work-eligible population: 30 million Labor force: 24 million Employed people: 21 million Frictionally unemployed people: 2 million Structurally unemployed people: 1.5 million Arthur would like to know whether his kingdom is enjoying an expansion or suffering a recession. See if you can advise him. Give all numeric answers to two decimals.

King Arthur, right now Avalon's unemployment rate is _____%, but Avalon's natural rate of unemployment is ___%. Therefore, the Avalon economy is currently in a(an) (enter expansion or recession).

Expert Solution

Unemployed = labor force - Employed

= 24-21 = 3

So • unemployment rate = (3/24)*100

= 100/8

= 12.5 %

• Natural unemployment rate = frictional + structural unemployment rate

= [(2+1.5)/24]*100

= 14.583 %

• current unemployment rate less than natural rate,

thus it is expansion

Rahul Sunny answered 2 years ago

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