Data for an economy show that the unemployment rate is 6 percent, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are unemployed this economy?

Question

Quizplus · Accepted Answer

Since the participation rate is 60 percent, 40 percent are not participating in the labor market. So the 200 million people are not participating represent 40 percent of the working-age population, or (0.40x)= 200,000,000, where x is the working-age population. Then x = 200,000,000/0.40 = 500,000,000, or 500 million. With 200 million of these 500 million people being outside the labor force, there must be 300 million in the labor force. Unemployment is 6 percent of 300 million, or 18.0 million.

Data for an Economy Show That the Unemployment Rate Is