Answer to Question #117173 in Economics for bo

Question

a) For a given year, of all adult residents, 268,447,000 were employed, 7,000,000 were unemployed, and 71,713,000 were not in the labour force. Calculate the labour force and unemployment rate. (3 marks)
b) If the unemployment rate is smaller than the natural rate of unemployment, what will the cyclical rate of unemployment be? Briefly explain. (3 marks)
c) State whether the natural rate of unemployment increases or decreases in the following scenarios. Specify whether it is a change of frictional unemployment or structural unemployment. (4 marks)
i) The development of 5G technology is expected to cause more frequent sectoral shifts.
ii) The government increases the unemployment insurance benefits.

Answer 1

a) For a given year, of all adult residents, 268,447,000 were employed, 7,000,000 were unemployed, and 71,713,000 were not in the labour force. The labour force is:

$LF = Employed + Unemployed = 268,447,000 + 7,000,000 = 275,447,000.$

The unemployment rate is:

$U = Unemployed/LF\times100 = 7,000,000/275,447,000\times100 = 2.54$ %.

b) If the unemployment rate is smaller than the natural rate of unemployment, then the cyclical rate of unemployment is negative.

c)

i) The development of 5G technology is expected to cause more frequent sectoral shifts.

In this case natural rate of unemployment will increase, it is a change in structural unemployment.

ii) The government increases the unemployment insurance benefits.

In this case natural rate of unemployment will increase, it is a change in frictional unemployment.