Question

Suppose the number of people employed (E) is currently 100 and the number unemployed (U) is 10 and the labor force is fixed at 110. The monthly separation rate (s) is 0.01 and the finding rate (f) is 0.18.

What is the current rate of unemployment? B What is the natural rate of unemployment?

Answer 1

Answer:

9.09% and 5.263%

Explanation:

The computation is shown below:

a. The current rate of unemployment is

= Number of Unemployed people ÷ labor force

= 10 ÷ 110

= 9.09%

b. The natural rate of unemployment is

= Separation rate ÷ Separation rate + finding rate

= 0.01 ÷ 0.01 + 0.18

= 0.01 ÷ 0.19

= 5.263%

These both should be expressed in a percentage forms