Scenario: Consider Country A with a population of 2 million people. In Country A, there are 1.5 million people employed; 0.3 million younger than 18, in school or retired; 0.1 million voluntarily unemployed; and 0.1 million people officially unemployed.
-Refer to the scenario above.Suppose that,given the numbers in the initial scenario,20 percent of the people reported as officially unemployed are actually only looking for jobs with wages above the market clearing wage rate.What is the true unemployment rate,given this information?

Question

Quizplus · Accepted Answer

The true unemployment rate is 5.1 percent. This is calculated by taking the number of people officially unemployed (0.1 million) and adding the number of people who are actually unemployed but are not officially counted as such (0.02 million), and then dividing this total by the total labor force (1.5 million). This gives us a true unemployment rate of 0.12 million / 1.5 million = 0.08, or 8 percent.

Scenario: Consider Country a with a Population of 2 Million