Country X has a population of 50 million people. One fifth of that population is
ID: 1177889 • Letter: C
Question
Country X has a population of 50 million people. One fifth of that population is 15 years old or less. There are 2 million part time employees and 27 milliom full time employees. 3 million people are looking for a job but cannot find one, and the remaining popluation is either reitred of not working and not looking for a job. (no people in the military and no people institionalized.
a) what is the labor force participation rate in country x?
b) what is the unemployemnt rate?
c) assume that the natural rate of unemployment in country x is 5%. Is this economy in full employment? what is the cyclical unemployment in country x?
Explanation / Answer
labor force participation rate in country x = (27+3+2)/50 = 64%
unemployemnt rate = (3+2)/32 = 15.625%
as unemployment rate > natural unemployment rate, it is not at full employment
cyclical unemployment = 2/32 = 6.25%