Question

A. The number of jobs created, rather than the unemployment rate, gives a more timely indication of the state of the economy. Explain what thinking must lie behind this claim.

B. If the population 16 years of age and older is 160 million, the number of discouraged works is 10 million, the labor force is 110 million, and total employment is 90 million, what is the measured unemployment rate?

C. Supposed that the population over age 15 is 140 million, the participation rate is 60 percent, and the unemployment rate is 10 percent. If the number of discouraged workers increases by 2 million, what does the unemployment rate become?

Answer 1

Ans:

A) The thinking behind this claim is that the unemployment rate considers only people who are actively looking for work in the prior 4 weeks and are currently available for work.This means unemployment rate does not completely reflect the state of the economy.Hence number of jobs created gives more timely indication of the state of the economy.

B) Total Unemployed = Labor force - Total employed

= 110 million - 90 million

= 20 million

Unemployment rate = Unemployed / Labor force

= 20 million / 110 million

= 0.182 or 18.2%

C) Labor force = 140 million * 60%

= 84 million

Labor force(after considering discouraged workers) = 84 million - 2 million

= 82 million

Total unemployed = 84 million * 10%

= 8.4 million

Total unemployed(after considering discouraged workers) = 8.4 million - 2 million

= 6.4 million

Unemployment rate = Unemployed / Labor force

= 6.4 million / 82 million

= 0.078 or 7.8%