Complete all three for u05a1 Problem 1. Assume the following data for a country:

Question

Complete all three for u05a1 Problem

1. Assume the following data for a country: total population, 500; population under 16 years of age or institutionalized, 120; not in labor force, 150; unemployed, 23; part-time workers looking for full-time jobs, 10. What is the size of the labor force? What is the unemployment rate?

Problem 2. If the CPI was 110 last year and is 121 this year, what is this year’s rate of inflation? In contrast, suppose that the CPI was 110 last year and 108 this year. What is this year’s rate of inflation? What term do economics use to describe this second outcome?

Explanation / Answer

Labor force =Total population-below 16 people-people not in labor force-unemployed

=500-120-150

=230

unemployment rate= no of people unemployed/total labor force

=23/230*100

=10%

2. Inflation rate this year= (121 - 110) / 110

= 10%

if  CPI was 110 last year and 108 this year then inflation rate=(108 - 110) / 110

= -1.82%

The inflation rate is negative, this means it is a situation of deflation.

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