In the country of Economica, the total labor force consists of 10,000 workers. 6

Question

In the country of Economica, the total labor force consists of 10,000 workers. 600 of these workers are unemployed, and thus the current unemployment rate is 6.0%. This year, 200 workers will lose their jobs, 170 workers will return to the labor force after an absence, 100 workers will voluntarily leave their jobs, and 500 new workers will enter the labor force. At the same time, 933 workers will find jobs, and 300 workers will retire or leave the labor force for other reasons.

1) Thus, at the end of the year, the labor force will consist of -------- workers, and the unemployment rate will be --------% (round your responses to one decimal place.)

Explanation / Answer

Labor force consists of both employed and unemployed.

Labor force at the beginning of the year = 10,000

Calculate labor force at the end of the year -

Labor force at the end of the year = Total labor force at the beginning of the year + Workers returned to the labor force + New workers added to the labor force - Workers who retired or left the labor force

Labor force at the end of the year = 10,000 + 170 + 500 - 300

Labor force at the end of the year = 10,370 workers

Calculate number of unemployed at the end of the year -

Number of unemployed at the end of the year = Number of unemployed at the beginning of the year + Workers who lost their job + New entrants into the labor force + Workers who had returned to the labor force + Voluntary unemployment - Wokers who got employed

Number of unemployed at the end of the year = 600 + 200 + 500 + 170 + 100 - 933

Number of unemployed at the end of the year = 637 workers

Calculate Unemployment rate -

Unemployment rate = Number of unemployed/Labor force = 637/10,370 = 0.0614 or 6.14%

Thus,

At the end of the year, the labor force will consist of 10,370 workers, and the unemployment rate will be 6.1 %

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