Question

Table 1 Total population Working-age population Employment Unemployment 20,000 15,000 1,000 100 2) Refer to Table I. The unemployment rate for this simple economy equals A) (100/1,000) x 100. B) (100/1,100) x 100. C) (100/15,000) * 100. D) (100/20,000) 100. 3) Refer to Table 1. The labor force participation rate for this simple economy equals A) (1,000/1,100) x 100. B) (1,000/15,000) 100. C) (1,100/15,000) x 100. D) (1,100/20,000) * 100. 4) Suppose the working-age population of a fictional economy falls into the following categories: 90 are retired or homemakers; 60 have full-time employment; 20 have part-time employment; 20 do not have employment, but are actively looking for employment; and 10 would like employment but do not have employment and are not actively looking for employment. The official unemployment rate as calculated by the U.S. Bureau of Labor would equal A) (20/60) 100. B) (20/80) x 100. C) (30/80) x 100. D) (20/100) 100. 5) Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students. This would cause A) the unemployment rate to decrease. B) the labor force participation rate to decrease. *C) the number of discouraged workers to increase. D) no change in the unemployment rate.

Answer 1

2. The unemployment rate is the ratio of number of unemployed people to the total labor force participation that is the number of people who are looking for job or people who already have job.

From table 1 we can see that total unemployed people = 100

And total labor force participation is equal to sum of employed + unemployed people = 1000+100= 1100

Unemployment rate= 100/1100 × 100

So the correct option will be option B.

3. The labor force participation is simply the ratio of total number of people who are looking for job that is unemployed plus people who already have a job that is employed to the total working age population.

Number of employed + unemployed = 1000+100= 1100

Working age population = 1500

Labor force participation = 1100/1500 × 100

So the correct option must be option C.

4. Again here we are asked to calculate the unemployment rate. The thing to remember is the same as question 2.

Total labor force participation = people who are working plus people who are looking for job. That is officially employed + unemployed.

Here total employed people = 60(full time employment) + 20(part time employment)

Unemployed = 20( who are actively looking for job)

Rest are either not looking for job or simply not officially employed( homemakers)

Total labor force participation = 60+20+20= 100

And number of unemployed people who are actively looking for job = 20.

Official employment rate = 20/100 × 100.

So the correct option will be option D.

Here important thing is to remember that people who are not employed and who don't look for work actively are not part of labor force. That's why we have excluded 10 people who don't have employment but like to be employed but are not looking for job actively.

5. In this question the government launches a successful campaign which as a result convinces worker with high school degree to quit their jobs and become full time college students. As a result we should expect the labor force participation rate to decrease because people who were previously working are not working any more and moreover they are out of labor force because they are now full time students and looking for a job.

So the correct option will be the option B. That is the labor force participation rate to decrease.