Consider a country with 300 million residents, a labor force of 150 million, and

Question

Consider a country with 300 million residents, a labor force of 150 million, and 10 million unemployed. Answer the following questions: (show your work for credit)

What is the labor force participation rate?

What is the unemployment rate?

If 5 million of the unemployed become discouraged and stop looking for work, what is the new unemployment rate?

Suppose instead that 30 million jobs are created and this attracts 20 million new people into the labor force. What would be the new rates for labor force participation and unemployment?

Explanation / Answer

a. the labor force participation rate is 50%. 150 million / 300 million = .5 = 50%

b. Unemployment rate = 10/150 = 6.67%

c.

new employment rate = (10 million – 5 million) / 150 million = 0.0333 = 3.33%

because discoraged workers are not considered in unemployed calculations.

d.

as 20 million people are added, the new labor force will increase to be = 150+20 = 170 million

new rates for labor force participation = 170/300 = 56.67

now as we know that 30 million jobs has been created that will fill the new 20 million people added and also provide jobs to the already unemloyed 10 millions. SO there will be no one unemployed,

New rates of unemployment = 0 / 300 = 0%

so

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