Suppose Xenia has a GDP of $15,000,000 and a population of 800,000 with a labor
ID: 1218677 • Letter: S
Question
Suppose Xenia has a GDP of $15,000,000 and a population of 800,000 with a labor force of 500,000. Further suppose that 80,000 people are not working; 60,000 are actively seeking employment but unable to find a job. Further suppose that 15,000 people are frictionally unemployed and 5,000 are structurally unemployed. Please use this info to answer the next four questions. 24. The UE rate in Xenia is ____? 25. The frictional rate of unemployment in Xenia is____? 26. The structural rate of unemployment in Xenia is ____? 27. The economic cost of UE in Xenia is______?
Explanation / Answer
(24) Unemployment rate = Number unemployed / Number in labor force
= (People not working + Seeking employment unable to find job + Frictionally unemployed + Structurally unemployed) / Number in labor force
= (80,000 + 60,000 + 15,000 + 5,000) / 500,000
= 160,000 / 500,000
= 0.32 = 32%
(25) Frictional unemployment rate = Number frictionally unemployed / labor force
= 15,000 / 500,000
= 0.03 = 3%
(26) Structural unemployment rate = Number structurally unemployed / Labor force
= 5,000 / 500,000
= 0.01 = 1%
(27) Economic cost of unemployment = GDP / Total number of unemployed people
= $15,000,000 / 160,000**
= $93.75 per unemployed person
**From Q24
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