Question

Please, I need full explanation and correct answer.

9) In a country with a working-age population of 22 million, 16 million are employed, 2 million are unemployed, and 1 million of the employed are working part-time, half of whom wish to work full-time. If 500,000 of those unemployed are cyclically unemployed, what is the natural unemployment rate?   9) _______

A) 5.6 percent

B) 9.4 percent

C) 8.3 percent   

D) 11.1 percent

E) 1.5 percent

Answer 1

Question 9

Calculate the Labor force -

Labor force = Employed + Unemployed = 16 million + 2 million = 18 million

Calculate the unemployment rate -

Unemployment rate = [Unemployed/Labor force] * 100 = [2 million/18 million] * 100 = 11.1%

The unemployment rate is 11.1 percent.

Cyclically unemployed = 500,000

Calculate the cyclical unemployment rate -

Cyclical unemployment rate = [Cyclically unemployed/Labor force] * 100 = [500,000/18 million] * 100 = 2.8%

The cyclical unemployment rate is 2.8 percent.

Calculate the natural unemployment rate -

Natural unemployment rate = Unemployment rate - Cyclical unemployment rate

Natural unemployment rate = 11.1 percent - 2.8 percent = 8.3 percent.

The natural unemployment rate is 8.3 percent.

Hence, the correct answer is the option (C).