Question

3. Suppose an economy is made up of 100 people who are in the following mutually exclusive categories shown in Table 1:

Table 1: Employment categories for fake economy

Number	Category
5	Under 16 years old
5	Disabled
5	Have been unemployed for a long time and have decided to stop looking for a job
5	Stay-at-home spouses
10	Retired
50	Currently working
10	Have jobs that are currently off for the summer
5	Had to leave jobs temporarily because of hurricane Sandy
5	Not employed and looking for work

(a) What is the percent of the workforce not in the labor force?

(b) What is the labor force participation rate?

(c) What is the unemployment rate?

Answer 1

Answer:- Total number of people not counted as labor force:-

Under 16 years old =5

Disabled=5

Have been unemployed for a long time and have decided to stop looking for a job =5

Stay-at-home spouses=5

Retired=10

Total =5+5+5+5+10 =30

The percent of the workforce not in the labor force =30/100 = 30%

Answer:- Labor Force Participation Rate = the number of people actively participating in the labor force /the total number of people eligible to participate in the labor force

Labor Force Participation Rate =60/70 =85.71

Answer:- Unemployment rate = Number of unemployed individual / total labor force

Unemployment rate =10/70=14.29%