Question

Country A with a civilian population of 75 mil (all over age 16), has 47 mil employed and 19 mil unemployed persons, of which 3 mil is frictionally unemployed and another 4 mil structurally unemployed. a) What is the size of the labor force? b) What is the actual unemployment rate? c) What is the labor force participation rate? d) What is the natural rate of unemployment (NRU)? e) Is this economy in a recession or a boom? Explain (in one sentence)

Answer 1

Answer
a) What is the size of the labor force?
Labor force=employed+unempoyed
=47+19
=66 million

b) What is the actual unemployment rate?
the rate of unemployment=unemployed/labor force
=19/66
=0.287878788
=28.79%
c) What is the labor force participation rate?
Labor force participation rate=labor force/population
=66/75
=0.88
=88%
d) What is the natural rate of unemployment (NRU)?
Natural rate of unemployment =(frictionally unemployed+structurally unemployed)/labor force
=(3+4)/66
=0.106060606
=10.61%