Answer to Question #158436 in Macroeconomics for sara

Question

a.      Assume the number of employed people in Pakistan is 22.5 million in 2020. The number of unemployed people during 2020 in Pakistan is 6 million, and the labor force participation rate is 60 percent.                                                             (1.5 Marks)

i.                   What is unemployment rate, size of the labor force and working age-population in the year of 2020 in Pakistan?

 

b.     In each of the following cases, does the increase in prices affect CPI, GDP deflator, or both in Pakistan? Analyze and justify your answer.                                           (2 Marks)

i.    The price of imported capital goods used in the production of sugar has increased.

ii.  The price of Tapal tea has increased.

c.      Analyze and explain the effect of the minimum wage law on the unemployment rate. Explain your answer by using graph.                                                             (1.5 Marks)

Answer 1

(A) Unemploymentrate=unemployed/totallabour∗100 

$=6/(6+22.5)*100$

$=21$

Labour force=employed+unemployed$=6+22.5$

$=28.5$ million

Working age population=labour force /rate of participation

$=60/28.5*100$

$=210$ million

(B) The increase in the prices will increase both GDP and CPI. Incrase I price means people have to spend much to survive hence increasing CPI. GDP measures inflation and when prices increases it also rises up.

(C)the minimum wage law increases unemployment among the youths as it increases number of job seekers .