Economics - Economics Section 2

21. Assuming that the working-age population is constant, if the labor force participation ratio declines while the number of people employed remains unchanged, the unemployment rate will most likely:

  • Option : B
  • Explanation : For a given working-age population, a decline in the labor force participation rate, which is often the result of an increase in discouraged workers, reduces the labor force. If the number of people employed remain the same while the labor force is smaller, the number of workers defined to be unemployed must be smaller and the unemployment rate lower.
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22. The following information applies to an economy:

Total population 2,200
Working age population 1,950
Labor force 1,500
underemployed 240
unemployed 190
Discouraged workers 160
Frictionally unemployed 50
Voluntarily unemployed80

  • Option : C
  • Explanation : Unemployment rate = (Unemployed / Labor force) * 100 = (190 / 1500) * 100 = 12.6%.
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24. Two analysts make the following statements:
Analyst 1: Comparisons of unemployment among countries are impossible.
Analyst 2: Comparisons of unemployment among countries must take into account different unemployment measurement methods. Which analyst’s statement is most likely true?

  • Option : B
  • Explanation : Different countries use different statistical scope and ratio definitions and these differences have to be reconciled before meaningful conclusions can be made from cross country comparisons.
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