Question

An economy has a working age population of 750. The size of the labor force is 520 and 440 people are employed.

            e) Recalculate the unemployment rate, labor force participation rate, and employment       population ratio after the following events:

                        i) Someone looking for a job becomes discouraged and quits looking

                        ii) Someone retires

                        iii) Someone looking for a job gets a job

            e) Explain how a falling unemployment rate can be a sign of an unhealthy economy

Answer 1

The falling rate of unemployment shows that the inflation in the economy is rising. This inverse relationship between unemployment and inflation is given by the phillips curve.