Consider a hypothetical economy in which the labor force consists of 100 people. Of those, 90 people are employed full-time and 10 people are unemployed. The economy follows the same conventions as the U.S. Bureau of Labor Statistics (BLS) in computing its employment figures. Therefore, initially the unemployment rate is calculated as follows: Unngled Unemployment Rate Number of the Laber F100 10 x 100 100 10% Suppose a reduction in foreign demand for this economy's products causes an economic recession-a prolonged period of declining output. The following table offers two possible scenarios resulting from the recession. Calculate the unemployment rate associated with each scenario in the following table. Assume that each scenario describes the only labor market changes in this economy. Scenario A: Firms reduce work hours by 30%. The number of involuntary part-time workers rises as firms respond to the reduction in the demand for their products by reducing the hours of each employed person from 40 to 28 hours per week. B: Firms reduce employment by 30%. The number of unemployed workers rises as firms Unemployment Rate
Consider a hypothetical economy in which the labor force consists of 100 people. Of those, 90 people are employed full-time and 10 people are unemployed. The economy follows the same conventions as the U.S. Bureau of Labor Statistics (BLS) in computing its employment figures. Therefore, initially the unemployment rate is calculated as follows: Unngled Unemployment Rate Number of the Laber F100 10 x 100 100 10% Suppose a reduction in foreign demand for this economy's products causes an economic recession-a prolonged period of declining output. The following table offers two possible scenarios resulting from the recession. Calculate the unemployment rate associated with each scenario in the following table. Assume that each scenario describes the only labor market changes in this economy. Scenario A: Firms reduce work hours by 30%. The number of involuntary part-time workers rises as firms respond to the reduction in the demand for their products by reducing the hours of each employed person from 40 to 28 hours per week. B: Firms reduce employment by 30%. The number of unemployed workers rises as firms Unemployment Rate
Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations
Section: Chapter Questions
Problem 7P
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