2. Explain whether each of the following events increases, decreases, or has no

Question

2. Explain whether each of the following events increases, decreases, or has no effect on the unemploy ment rate and the labor-force participation rate. a. After a long search, Jon finds a job b. Tyrion, a full-time college student, graduates and is immediately employed c. After an unsuccessful job search, Arya gives up d. Daenerys quits her job to become a stay-at-home e. Sansa has a birthday, becomes an adult, but has no f. Jaime has a birthday, becomes an adult, and starts looking and retires mom. interest in working. looking for a job

Explanation / Answer

Labor force participation rate (LFPR) = Labor force / Working-age population

Unemployment rate = Number unemployed / Labor force

(a) Unemployment rate falls since Jon is no longer unemployed. But LFPR remains unchanged since Jon was in labor force while he was seeking job.

(b) Unemployment rate falls and LFPR rises, since Tyrion wasn't in labor force when he was studying.

(c) Unemployment rate falls (since Arya, a discouraged worker, leaves the labor force, lowering the number of unemployed) and LFPR falls.

(d) Unemployment rate falls (since Daenerys leaves the labor force, lowering the number of unemployed) and LFPR falls.

(e) Unemployment rate stays unchanged (since Sansa does not join labor force) and LFPR falls.

(f) Unemployment rate falls and LFPR rises.

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