Question

Suppose Xenia has a GDP of $20,000,000,000 and a population of 900,000 with a labor force of 600,000. Further suppose that 60,000 people are not working, of which 48,000 are actively seeking employment and 12,000 have given up. Further suppose that the frictional rate of unemployment is 1% and the structural rate is 2%. P

33. The number of people who are frictionally unemployed is _______.

34. The economic cost of UE in Xenia is _______________.

Now suppose that all of those who had “given up”, resume their job-search activity. In the immediate aftermath of this development:

35. Now the UE rate in Xenia is ______.

36. Now the number of people who are frictionally unemployed is ______.

Answer 1

Q-33 :: ANSWER ::

=> EXPLANATION ::

Total Unemployed People =  48,000

So Frictionally Unemployed Is 1% = 0.01

So Frictionally UE = 48,000 * 0.01

= 480

Q-34 :: ANSWER ::

=> Explanation ::

-> Economic Cost Of Unemployed =

= $20,000,000,000 * 48,000/ 900,000

= $1,066,666,667

Q-35 :: ANSWER ::

=> Explanation ::

-> New Uemployment = 48000 + 12000 = 60,000

So Unemployment Rate = Unemployed Pepole / Labor Force * 100

= 60,000/600,000 * 100

= 10%

Q-36 :: ANSWER ::

=> Explanation ::

New Unemployment = 60,000

So Frictionally Unemployed = 1% = 0.01

So FU = 60,000 * 0.01

= 600