Use the table below to answer the following questions: Labor Force of an Economy

Question

Use the table below to answer the following questions: Labor Force of an Economy lEmployed Labor Force Number of People (millions) Structurally unemployed Cyclically unemployed Frictionally unemployed 159.5 5.4 5.5 3.0 okInstructions: Rouna your answers to two decimal places a. Calculate the actual unemployment rate and the natural rate of unemployment for this economy. rint Actual rate of unemployment:--% Natural rate of unemployment-) % erences b. Now assume that cyclical unemployment increases by 1.8 milion while structural unemployment decreases by 0.5 million. Calculate the unemployment rate and the natural rate of unemployment for this economy % Actual rate of unemployment % Natural rate of unemployment:

Explanation / Answer

The natural rate is the sum of frictional and structural unemployment

A.Actual rate of unemployment=structural+cyclical+frictional

Actual rate of unemployment=5.4+5.5.+3=13.9

Natural rate of unemployment=structural+frictional

Natural rate of unemployment=5.4+3=8.4

B.New cyclical unemployment=5.5+1.8=7.3

New structural unemployment=5.4-.5=4.9

Actual unemployment=4.9+7.3+3=15.2

Natural rate of unemployment=4.9+3=7.9

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