Questions and Answers
What is the labor force?
To be counted as unemployed, one must:
If a country has a working-age population of 200 million, 135 million people with jobs, 10 million people who were looking for a job but have given up, and 5 million people unemployed and seeking employment, what is its labor force?
If 8 million people are seeking jobs, 2 million give up their searches, what happens to the unemployment rate?
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What is the unemployment rate on an island with 1,000 people having jobs, 250 people looking for jobs, and 450 people neither working nor looking?
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If 150 people who weren't looking for work begin looking, with now 400 people looking for work and 1,000 people working, what happens to the unemployment rate?
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Which of the following statements is false?
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What is the Labor Force Participation Rate in Livonia, where 60% are employed and 10% are unemployed?
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The official unemployment rate may underestimate unemployment by excluding:
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Unemployment that occurs because it takes workers time to find each other is called:
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An example of frictional unemployment is a(n):
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An example of structural unemployment is a(n):
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Study Notes
Labor Force and Employment Concepts
- Labor Force: Total of employed and unemployed individuals actively seeking work.
- Unemployment Criteria: To be counted as unemployed, one must be out of work and actively looking for a job.
- Labor Force Calculation: In a scenario with 200 million working-age individuals, 135 million employed, and 5 million unemployed while seeking work, the labor force is calculated as 140 million.
Unemployment Rate Dynamics
- A drop in actively seeking job status can reduce the unemployment rate; for instance, if 2 million out of 8 million seeking jobs give up, the unemployment rate will fall.
- Unemployment Rate Calculation Example: On a small island with 1,000 employed, 250 seeking jobs, and 450 inactive, the unemployment rate requires distinctions between active job seekers and the overall population.
- If previously inactive individuals begin seeking jobs, the unemployment rate may rise despite maintaining the same number of employed individuals.
Economic Indicators and Relationships
- Unemployment trends inversely correlate with economic cycles—rising during recessions and potentially falling during expansions. The statement that "unemployment always falls during expansions" is false.
- Labor Force Participation Rate: This rate indicates the percentage of the adult population that is either employed or actively seeking employment. For example, in Livonia with a 60% employment rate and 10% unemployed, the participation rate is 70%.
Measuring Unemployment
- The official unemployment rate can underreport true unemployment levels by excluding discouraged workers not actively seeking jobs.
- Types of Unemployment:
- Frictional Unemployment: Occurs due to the time it takes for individuals to find new jobs, e.g., a real estate agent searching for a new position after relocation.
- Structural Unemployment: Results from fundamental changes in the economy, e.g., a geologist permanently laid off due to labor union wage increases.
Examples of Different Unemployment Types
- Frictional: A worker quits a low-paying job to look for a better one, reflecting transitions in employment.
- Structural: Permanent layoffs related to economic advancements or changes in industry demands, distinguishing from temporary or cyclical unemployment scenarios.
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Enhance your understanding of key economics concepts with these flashcards. Focus on terms related to the labor force and unemployment definitions. Perfect for students looking to solidify their knowledge in this subject area.
