Question

# Assume you have the following information about an economy: Labor Force of an Economy Number of...

Assume you have the following information about an economy:

Labor Force of an Economy

 Number of People (millions) Population over age 16 248.2 Labor force 156.0 Not in the labor force 92.2 Employed 146.4 Unemployed 9.6

a. What is the unemployment rate in this economy?%

b. What is the labor force participation rate? %

c. Assume that 1 million discouraged workers decide to start looking for work again, thereby increasing the number of officially unemployed workers by 1 million. What is the unemployment rate now? %

d. What is the new labor force participation rate?

2. The table below lists the prices from last year and the base year for a college-related basket of goods.

 Basket of Goods Price Base Year (dollars) Price Last Year (dollars) Gasoline (per gallon) \$ 2.05 \$2.60 Pizza (per pizza) 4.75 8.15 Beer (per 6-pack) 4.25 7.07 Textbook (per book) 102.00 234.00

a. What is the total cost for a basket of goods that includes 210 gallons of gas, 55 pizzas, 40 6-packs, and 4 textbooks?

In the base year: \$

Last year: \$

b. Using this basket of goods, compute the following CPI values:

In the base year:

Last year:

c. Assume that rather than buying textbooks for their courses last year, all students decided to buy online access cards at \$95 per textbook. Compute the total cost for this basket of goods and the CPI.

CPI:

a)

Unemployment Rate = (Number of Unemployed / Labor Force) * 100

Labor Force = Number of Employed + Number of Unemployed

Number of unemployed= 9.6 million

Labor force= 156 million

Unemployment rate= (9.6/156) x 100=6.15%.

b) Labor Force Participation Rate (LFPR)

LFPR = Labor Force / Civilian Non-Institutionalized Population

where the Labor Force = Employed + Unemployed.

Labor force= 156 million

Civilian Non-Institutionalized Population =248.2

LFPR= (156/248.2) x 100=62.85%.

c. New unemployed- 9.6+1 million= 10.6 million

New labor force= Number of Employed + Number of Unemployed

= 146.4 million + 10.6 million=157 million

New unemployment rate = (10.6/157) x 100 = 6.75%

d) New LFPR= (157/248.2) x 100= 63.26%

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