Suppose the town of Boone has a total population of 50,000 people. Of those, 45,

Question

Suppose the town of Boone has a total population of 50,000 people. Of those, 45,000 people are employed. There are 1,000 full-time students who are not employed or actively seeking work. The rest of the people are out of work but have been actively seeking work within the past four weeks. Instructions: In part a, round your answer to 1 decimal place. In part b, enter your answer as a whole number a. What is Boone's unemployment rate? percent b. Suppose there are 2,000 people who are unemployed as a result of cyclical unemployment and 1,000 people who are unemployed as a result of structural unemployment. How many people are unemployed as a result of frictional unemployment?

Explanation / Answer

(a)

Labor force = Total population - Full-time students

Labor force = 50,000 - 1,000

Labor force = 49,000

Number of unemployed = Labor force - Number of employed

Number of unemployed = 49,000 - 45,000

Number of unemployed = 4,000

Calculate the unemployment rate -

Unemployment rate = (Number of unemployed/Labor force) * 100

Unemployment rate = (4,000/49,000) * 100 = 8.16% or 8.2%

Boone's unemployment rate is 8.2 percent.

(b)

Calculate the frictional unemployment -

Frictional unemployment = Total unemployment - Cyclical unemployment - Structural unemployment

Frictional unemployment = 4,000 - 2,000 - 1,000 = 1,000

So,

1,000 people are unemployed as a result of frictional unemployment.

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