labor force participation rate = # in labor force / # working age population * 1
ID: 1163737 • Letter: L
Question
labor force participation rate = # in labor force / # working age population * 100
unemployment rate = # unemployed / # in labor force * 100
1. The population of the country Econostan is 500,000 people, with 100,000 children, 50,000 elderly, and 350,000 working age people (assume no elderly people want to work). In 2016 225,000 people in Econostan had a paying job and 50,000 people didn’t have a job but were actively looking for one. In 2017 220,000 people in Econostan had a paying job and 30,000 people didn’t have a job but were actively looking for one.
a. What was the labor force participation rate in Econostan in 2016?
b. What was the unemployment rate in Econostan in 2016?
c. What was the labor force participation rate in Econostan in 2017?
d. What was the unemployment rate in Econostan in 2018?
e. Describe what changes are happening in Econostan from 2016 to 2017. Is the labor market in Econostan improving?
Explanation / Answer
a. Total working age population= 500000-100000-50000= 350000
Labor force = employed + unemployed
= 225000 + 50000= 275000
Labor force participation rate= 275000*100/350000= 78.57%
b. In 2016 labor force = 350000
Number of unemployed= 50000
Unemployment rate= 50000*100/350000
= 14.28%
c. Labor force in 2017= 220000 + 30000= 250000
Labor force participation rate= 250000*100/350000= 71.42%
d. Unemployment rate= 30000*100/250000= 12%.
e. Unemployment rate has fallen in 2017 but this does not mean the labor market is improving as labor force in 2016 was 275000 and it has decreased to 250000.
25000 people have become discouraged and have given up looking for the job but they are likely to do a job if offered.
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