Question

The table below shows labor market statistics for a nation. 

Number of Workers Structurally Unemployed 

Number of Workers Cyclically Unemployed 

Number of Workers Frictionally Unemployed 

Number of Workers Officially Classified as Employed 

Working-age Population 

What is the nation's unemployment rate?

Which of the following unemployed individuals represents frictional unemployment? 

(A) Marissa, a full-time student who plays on the school's soccer team. 

(B) Janet, an accounting graduate who is interviewing with a number of accounting firms. 

(C)Sameer, a retired faculty member who volunteers at the local hospital. 

(D) Jeremy, a customer service representative who was laid-off after his job was automated. 

(E) Elizabeth, a financial analyst who was laid off because of the recession.

The natural rate of unemployment can be defined as the 

• unemployment rate consistent with accelerating inflation 

• unemployment rate of the least-skilled workers 

• economy's long-run equilibrium rate of unemployment 

• labor force participation rate plus the unemployment rate 

• labor force participation rate minus the unemployment rate

Answer 1

1.

Labor force = unemployed + employed

=(3+4+2)+91

=100 million

Unemployed=3+4+2

=9 million

Unemployment rate= (unemployed / LF)*100

=(9/100)*100

=9%

2.

Since frictional unemployment arise when people change one job for getting another and in this way they remain unemployed for some time.

Since Janet, an accounting graduate who is interviewing with a number of accounting firms, so she is unemployed for some time for searching better employed.

Hence option B is an example of frictional unemployment.

Hence option B is the correct answer.

3.

Since natural level of unemployment is that unemployment at which there is some frictional and structural unemployment exist, this is short-term temporary unemployment and it may vanish in near future. The structural unemployment exists when there is a shifts in the economy which creates a mismatch between the skills workers have and the skills needed by employers.

When there is full employment, then it means that all resources are utilized efficiently. But it does not means that there will be zero unemployment rate, there will be natural rate of unemployment at full employment level.

Hence it can be said that the natural rate of unemployment can be defined as the economy’s long-run equilibrium rate of unemployment.

Hence option C is the correct answer.