Data for an economy shows that the unemployment rate is 10 percent, the participation rate 80 percent, and 200 million people 16 years or older are not in the labor force. How many people are in the labor force in this economy?

Question

Quizplus · Accepted Answer

Since the participation rate is 80 percent, 20 percent are not participating in the labor market. So the 200 million people are not participating represent 20 percent of the working-age population, or (0.20x)= 200,000,000, where x is the working-age population. Then x = 200,000,000/0.20 = 1,000,000,000, or 1 billion. With 200 million of these 1 billion people being outside the labor force, there must be 800 million are in the labor force.

Data for an Economy Shows That the Unemployment Rate Is