Question

In: Economics

Consider a country with 500 adult population in 2018. Suppose in the year 2018, the labor...

Consider a country with 500 adult population in 2018. Suppose in the year 2018, the labor force

participation rate is unknown but the employment rate is 60%. Suppose further that in the year 2019,

the labor force participation is 75%, and the employment rate is 80%. If the labor force participation

rate increased from 2018 to 2019 and the total number of people unemployed remained the same, what

must be true of the total adult population size in 2019?

(a) The total adult population size is more than 1000 in 2019.

(b) The total adult population size is less than 1000 in 2019.

(d) The total adult population size decreased.

Solutions

Expert Solution

Labor force participation Rate = (No. of people in labor force / Total working age population)*100

Employment rate = (No. of people employed / No. of people in labor force)*100

In 2018:

Employment rate = 60%

Let labor force participation rate be x%

In 2019:

Employment rate = 80%

$\frac{\text { No. of people employed}}{\text {No. of people in labor force}} = 0.8\\ \Rightarrow \frac{\text { No. of people unemployed}}{\text {No. of people in labor force}} = 0.2 \hfill(1)$

Labor force participation rate = 75%

$\frac{\text { No. of people in labor force}}{\text {Working age population}} = 0.75 \hfill(2)$

Multiplying (1) and (2)

No. of unemployed people same in 2018 and 2019.

Given, labor force participation rate increased from 2018 to 2019 => x < 0.75

=> Working age population in 2019 < 1000

Correct Ans - B

Rahul Sunny answered 9 months ago

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