Answer to Question #301425 in Macroeconomics for Ananya

Question

In Canada between June and July in 2016, the number of full-time jobs increased by 63,200 while part-time jobs fell by 108,800. The unemployment rate increased from 6.4 percent to 7.2 percent. The labor force participation rate increased from 66.5 percent to 66.6 percent.

i. Explain the link between the rise in the participation rate and the rise in the unemployment rate.

Calculate the nominal GDP for 2016, 2017 and 2018.

Calculate real GDP for 2016, 2017, and 2018.

Calculate growth rate of nominal and real GDP for 2017 and 2018.

Are nominal and real GDPs same for a given year? Please explain. Calculate the inflation rates for 2017 and 2018 using GDP deflator method.

ii. If all the workers who entered the job market were discouraged searches, explain how the R5 unemployment would have changed.

Answer 1

i. Explain the link between the rise in the participation rate and the rise in the unemployment rate.

The labor force participation rate is the proportion of individuals who are in the working

population, whereas unemployment is the number of persons who are out of work but actively

looking for job. The link between a rise in the participation rate and a spike in the rate of

unemployment is that since no full-time jobs have been lost, the unemployment rate has climbed

to some degree.

The labor force participation rate is the proportion of individuals who are in the working

population, whereas unemployment is the number of persons who are out of work but actively

looking for job. The link between a rise in the participation rate and a spike in the rate of

unemployment is that since no full-time jobs have been lost, the unemployment rate has climbed

to some degree.

There are people in the workforce, and there are people who are searching for work, but there are also those who are not in the workforce but are actively seeking for work. Since no full-time jobs have been lost as a result of the increase in the participation rate, the unemployment rate has risen as well.

Calculate the nominal GDP for 2016, 2017 and 2018.

Nominal GDP =quantities purchase*base year price

While we have the

Capital stock at the end of 2017 = $46.6 billion.

Capital stock at the end of 2018 = $47.0 billion.

So the NGDP in 2018 = (47-46.6) billion $0.4 billion..

Calculate real GDP for 2016, 2017, and 2018.

Real GDP in 2018 =$2.8 billion

Calculate growth rate of nominal and real GDP for 2017 and 2018.

and the net Growth rate is $0.4 billion.

So the depriciation in 2018 = $2.4 billion.

Are nominal and real GDPs same for a given year? Please explain. Calculate the inflation rates for 2017 and 2018 using GDP deflator method.

Deflator = $(NGDP/RGDP)× 100$

= $(0.4/2.8)×100$

=14.287

Inflation = $(Deflator in current-deflator in previous)/deflator in previous$

Inflation = $(14.287-7.2)/7.2$

Inflation= 0.9843

The percentage of persons in the workforce is known as the labour force participation rate, while the number of people actively looking for work is known as the unemployment rate. The rise in the participation rate is linked to an increase in the unemployment rate since there has been no growth in the number of full-time jobs. Part-time work have dropped in quantity, which raises the unemployment rate.

ii. If all the workers who entered the job market were discouraged searches, explain how the R5 unemployment would have changed.

If all workers were discouraged searchers in the job market, then R5 would not have changed

because the quantity of discouraged searchers is not included in the unemployment rate.

There would be no change in R5 if all employees were discouraged job seekers, as the number of discouraged job seekers is not reflected in the unemployment rate. The number of people without jobs will climb. Workers who had previously been discouraged are now included in the labour force. The unemployment rate will climb as more people join the labour force but are unable to find work.