Question

26. Consider the following information for a particular economy.
Total population = 100 million Number of employed = 15 million
Total labor force = 45 million Natural rates of unemployment = 10%

a. Find the total unemployment rate
b. Calculate the cyclical unemployment rate

Answer 1

The following formula is used to calculate the unemployment rate;

$Unemployment\ rate=\dfrac{ unemployed \ persons} { total\ labor\ force}*100$

Total labor force = 45million

Employed people=15million

Unemployed persons=$45-15=30million$

$Unemployment\ rate =\dfrac{30000000}{45000000}*100$

$=\dfrac{2}{3}*100$

$Unemployment\ rate=66.7\%$

b. Cyclical unemployment rate.

$Cyclical\ unemployment\ rate= current\ unemployment\ rate- natural\ rate\ of\ unemployment$ Therefore,

$Cyclical\ unemployment\ rate= 66.7-10=55.7\%$