Question

In: Economics

In the country of Upper Sasdonia of Alemania, in the first semester, there are 60 people...

In the country of Upper Sasdonia of Alemania, in the first semester, there are 60 people employed, 25 unemployed, and 15 out of the labor force. At the end of the first semester, 5 workers got fired and are still searching, 10 workers got fired but aren’t searching, 5 unemployed people got hired, 10 unemployed workers got discouraged, 5 out of the labor force found a job directly, and 5 out of the labor force started searching.
1. What is the unemployment rate during the first semester?
2. What is the participation rate during the first semester?
3. How many people are employed/unemployed/out of the labor force in the second semester?
4. What is the unemployment rate during the second semester?
5. What is the participation rate during the second semester?
6. What can you conclude about the state of the labor market during the year?

Expert Solution

a. Unemployment rate = no. of unemployed / labor force

The labor force is the no. of people who are working and are actively looking for a job. In other words,

Labor force = Employed + unemployed

Unemployed = 25

labor force = 60+ 25 = 85

Unemployment rate = 25/85*100

= 29.41%

b. The participation rate is the percentage of people who are employed or actively seeking a job.

participation rate = labor force/adult population

= 85/100

= 85%

c. employed = 60 - 5 - 10 + 5 + 5 = 55

Unemployed = 25 + 5 -5 - 10 + 5 = 20 (Those who are not looking for a job are not unemployed)

Out of labor force = 15 +10 + 10 - 5 - 5 = 25 (Those who are discouraged and not looking for a job are out of labor force)

Total = 55 + 20 + 25 = 100

d. Unemployement rate

= 20/(55+20)

=20/75

= 26.67

f. Participation rate = (55+20)/100

= 75/100

75%

g. The state of labor market during the year has worsened. Although on paper Employement rare increased and unemployment rate but it is only because of people dropping out of labor market. Employement rate was 70.59% (60/85*100) and increased to 73.33(55/75*100). The labor force shrank from 85 to 75 which is not a good thing since they are no more contributing to the economy. But it is possible that the people not looking for a job is a temporary thing and they met start looking for it after some time.

Rahul Sunny answered 2 years ago

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