Question

If the steady-state unemployment rate for an economy is 5%, and each period 2% of employed workers lose their jobs, what percent of unemployed workers find employment each period?

A. 8%
B. 18%
C. 28%
D. 38%
E. 48%

Answer 1

Answer:

D. 38%

Explanation:

We know that,

Steady -state unemployment rate = (Employed workers lose their jobs) ÷ (Employed workers lose their jobs + unemployed workers find employment)

0.05 = (0.02) ÷ (0.02 + unemployed workers find employment)

0.05 × 0.02 + 0.05 × unemployed workers find employment = 0.02

0.001 +  0.05 × unemployed workers find employment = 0.02

0.05 × unemployed workers find employment = 0.02 - 0.001

0.05 × unemployed workers find employment = 0.019

So, unemployed workers find employment would be 0.38 or 38%