Question

Thank you

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes the question prompts you to "Calculate you must show how you arrived at your final answer The table below shows unemployment and labor force statistics for an economy Actual rate of unemployment 3% 125 million Natural rate of unemployment Population of the country Number of people employed Number of people unemployed Number of people employed part time Number of discouraged workers 97 milion 3 million 5 million 2 million (a) Calculate the size of the labor force. Show your work b) Calculate the labor force participation rate. Show your work (c) Given the state of the economy described in the table, is actual real output less than, greater than or equal to potential real output? Explain (d) Calculate what the cyclical unemployment rate would be if the actual rate of unemployment increased to 5 percent. Show your work (e) Suppose discouraged workers reenter the labor force and find employment. Will the actual rate of unemployment increase, decrease, or stay the same?

Answer 1

A) Labour force= employed+ unemployed=97+3=100 million

B) Labour force participation rate=100/125]*100=4/5*100=80%

C) potential GDP is when economy Operate at Natural rate of unemployment.

Actual unemployment is lower than Natural rate of unemployment.so actual gdp is above potential GDP

D) new actual unemployment rate=5%

Cyclical unemployment rate= actual unemployment rate- natural rate of unemployment rate=5-4=1%

E) after discouraged workers enter the market.

Labour force=100+2=102 million

Unemployed people=3 million ( still same because all new discouraged workers find work)

Unemployment rate=3/102*100=2.94%

So unemployment rate Decreases.