Question

1) The table below lists the number of people by labor force classification for the country of Grenyarnia.

Employed	78 million
Unemployed	12 million
Not in the Labor Force	30 million

a.) Calculate the number in the labor force, and the unemployment rate.

b.) Calculate the number in the adult population, and the labor force participation rate.

c.) Suppose 8 million people who were previously employed become discouraged workers. Recalculate the unemployment rate and the labor force participation rate.

d.) Why might a favorable change in the economy, such as technological improvement or a decrease in the price of imported oil, be associated with an increase in frictional unemployment?

Answer 1

A)  The labor force is the sum of the number of employed people and the number of unemployed people.

78 mill+ 12 mill= 90 million

) The unemployment rate is calculated as

[(unemployment) ÷ (labor force)] × 100

12÷90×100= 13.33%

B)adult population= employed+unemployed + not in labour force

120 million

Labour force participation rate= labour force/ adult pop × 100

90÷120×100= 75%

C) labour force reduces by 8 million and becomea 82 million

New unemployment rate 12÷82×100= 14.63%

New LFPR= 82/120×100 =68.33%

D)some favourable changes involve sectoral shocks that changes the demand for labor among different firms.. For example a decrease in the price of imported oil would likely reduce the demand for U.S. oil workers and increase demand for automobile workers. Due to this some industries decline and other advance creating frictional unemployment

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