Question

Assume that the rate of unemployment is around 11% . Further assume that the growth rate will be high this year and that 2 million people who formerly were discouraged will find the courage to search for jobs. Find the unemployment rate if 2 million jobs were to created and if the labour force would increase by a million.

Answer 1

Suppose that labour force is 100 million. according to the unemployment rate of 11% we have total number of unemployed people equal to 11 million. now there are 2 million jobs created which means 2 million people from the unemployment group will get employment. This makes the number of unemployed people decreases to 9 million. 2 million people who were previously discouraged are now encouraged to find a job which means they are now a part of unemployment group. This makes the number of people unemployed rises to 11 million.

Labour force is increased by 1 million according to the information and also by 2 million due to the turning off the discouraged workers into unemployed ones. Labour force is now 103 million. Unemployed workers are now 12 millions

New unemployment rate 12/103 = 11.65%.