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.

Now suppose that all of those who had “given up”, resume their job-search activity. In the immediate aftermath

30. Now the frictional rate of UE is _____.

31. Now the structural rate of UE is ______.

32. Now the size of the labor force is ________.

Explanation / Answer

30) Frictional unemployment is the unemployment which exists in any economy due to people being in the process of moving from one job to another. Such people are included in the labor force. When people are able to find a job of their choice frictional unemployment decreases. So it will decrease in the case when those who had given up are able to find job.

31) Structural unemployment is a form of unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers. In this case structural unemployment will not Change.

32) labour force includes both employed and unemployed people. It will increase in this case.

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