Consider a hypothetical economy in which the labor force consists of 200 people. Of those, 190...
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Consider a hypothetical economy in which the labor force consists of 200 people. Of those, 190 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: Unemployment Rate Number of Unemployed People Number of People in the Labor Force 10 x 100 200 5% x 100 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 20%. 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 32 hours per week. B: Firms reduce employment by 20%. The number of unemployed workers rises as firms respond to the reduction in the demand for their products by laying off 38 previously employed workers. Unemployment Rate % Consider a hypothetical economy in which the labor force consists of 200 people. Of those, 190 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: Unemployment Rate Number of Unemployed People Number of People in the Labor Force 10 x 100 200 5% x 100 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 20%. 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 32 hours per week. B: Firms reduce employment by 20%. The number of unemployed workers rises as firms respond to the reduction in the demand for their products by laying off 38 previously employed workers. Unemployment Rate %
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