Suppose Xenia has a GDP of $15,000,000 and a population of 800,000 with a labor

Question

Suppose Xenia has a GDP of $15,000,000 and a population of 800,000 with a labor force of 600,000. Further suppose that 80,000 people are not working, of which 60,000 are actively seeking employment and 20,000 have given up. Further suppose that the frictional rate of unemployment is 2% and the structural rate is 1%. Please use this info to answer the next six questions.

24. The UE rate in Xenia is ______.

25. The number of people who are cyclically unemployed is ______.

26. The number of people who are structurally unemployed is _______.

of this development:

Explanation / Answer

(24)

Unemployment rate = Number unemployed / Labor force = 60,000 / 600,000 = 0.1 = 10%

(25)

Cyclical unemployment rate = Overall unemployment rate - Frictional unemployment rate - Structural unemployment rate

= (10 - 2 - 1)% = 7%

Number cyclically unemployed = 60,000 x 7% = 4,200

(26)

Number structurally unemployed = 60,000 x 1% = 600

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