Principles of economics (macro)

Exercises # 3

Question 1: In June 2009, at the trough of the Great Recession, the Bureau of Labor Statistics
announced that of all adult Americans, 140,196,000 were employed, 14,729,000 were
unemployed, and 80,729,000 were not in the labor force. Use this information to calculate:
a) the adult population.

b) the labor force.

c) the labor-force participation rate.

 d) the unemployment rate.

Question 2: In country A, the working age population is 60 million people, people with jobs
are 37.5 millions and unemployed people are 4.5 millions.
Calculate:
a) the workforce (labor force)
𝐿𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒 = 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑 + 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑
𝐿𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒 = 37.5 𝑚𝑖𝑙𝑙𝑖𝑜𝑛𝑠 + 4.5 𝑚𝑖𝑙𝑙𝑖𝑜𝑛𝑠
𝐿𝑎𝑏𝑜𝑟 𝐹𝑜𝑟𝑐𝑒 = 42 𝑚𝑖𝑙𝑙𝑖𝑜𝑛𝑠

b) the labor force participation rate

𝑙𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒
𝐿𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒 𝑝𝑎𝑟𝑡𝑖𝑐𝑖𝑝𝑎𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 = ×100
𝑎𝑑𝑢𝑙𝑡 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛

42
𝐿𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒 𝑝𝑎𝑟𝑡𝑖𝑐𝑖𝑝𝑎𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 = × 100
60
𝐿𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒 𝑝𝑎𝑟𝑡𝑖𝑐𝑖𝑝𝑎𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 = 70%

c) the unemployment rate.

𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑
𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 𝑟𝑎𝑡𝑒 (𝑢 − 𝑟𝑎𝑡𝑒) = ×100
𝐿𝑎𝑏𝑜𝑟 𝑓𝑜𝑟𝑐𝑒

4.5 𝑚𝑖𝑙𝑙𝑖𝑜𝑛𝑠
𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 𝑟𝑎𝑡𝑒 (𝑢 − 𝑟𝑎𝑡𝑒) = ×100
42 𝑚𝑖𝑙𝑙𝑖𝑜𝑛𝑠

𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 𝑟𝑎𝑡𝑒 (𝑢 − 𝑟𝑎𝑡𝑒) = 10.7%

Question 3: Explain whether each of the following events increases, decreases, or has no effect
on the unemployment rate and the labor-force participation rate.
a) After a long search, Jon finds a job.
b) Tyrion, a full-time college student, graduates and is immediately employed.
c) After an unsuccessful job search, Arya gives up looking and retires.
 d) Daenerys quits her job to become a stay-at-home mom.
e) Sansa has a birthday, becomes an adult, but has no interest in working.
f) Jaime has a birthday, becomes an adult, and starts looking for a job.
g) Cersei dies while enjoying retirement.
h) Jorah dies working long hours at the office.

Answers:

Scenario Unemployment rate Labor force participation rate

a) Decrease No effect
b) Decrease Increase
c) Decrease Decrease
d) Increase Decrease
e) No effect Decrease
f) Increase Increase
g) No effect Increase
h) Increase Decrease

Explanations:
Unempoylment rate
Labor force participation rate: