macroeconomics
Suppose that the labour force is currently 5 million and the unemployment rate is 8%. On August 1, government announces that it will create 40,000 new jobs to be filled over the next three months. Only people who were unemployed on August 1 will be hired. As a result, 130,000 people immediately apply for the jobs; half of these people had previously not been actively seeking work.
a. Has the labour force changed as a result of this announcement?
b. The unemployment rate after the announcement but before the jobs are filled will be %. Enter your responses rounded to one decimal place.
c. Once all the jobs are filled, the unemployment rate will be %.
Homework Answers
Correct answer:
a.
Yes, the labour force has changed as a result of this announcement
Reason: With half of the 110,000 people not actively seeking work (and thus out of labor force) apply for jobs, the labor force will increase by 110,000/2 = 55,000
b.
Unemployment rate = 0.12 = Unemployed/6,000,000
Unemployed = 720,000
After announcement labor force = 6,000,000 + 55,000 = 6,055,000
After announcement unemployment rate = 720,000/6,055,000 = 0.1189 or 11.89%
c.
After jobs are filled,
Unemployed = 720,000 - 48,000 = 672,000
Unemployment rate = 672,000/6,055,000 = 0.1109 or 11.09%
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