6 Unemployment
6.1 The definition and calculation of unemployment
Review Activities
Directions: Classify each of the following people as employed, unemployed, or not in the labor force.
Practice Problems
Problem 6.1.1: Consider the employment breakdown for a small island economy.
| Group | People (thou.) |
| Employed | 200 |
| Unemployed | 50 |
| Not in the Labor Force | 100 |
| Adult Population | 350 |
- Calculate the labor force participation rate.
- Calculate the unemployment rate.
Answers: 71.4%; 20.0%
Problem 6.1.2: The nation of Behrendonia has conducted an employment survey of its citizens. Below is the result of the survey. It should be noted that each person belongs to exactly one group.
- Total citizens: 80 million
- Children: 10 million
- Employed, full-time: 40 million
- Employed, part-time (but are happy with part-time work): 6 million
- Employed, part-time (but want full-time work): 3 million
- People without work, want to work, and are actively seeking employment: 7 million
- People without work, want to work, but have given up seeking employment: 2 million
- Retired citizens: 12 million
- Calculate the labor force participation rate.
- Calculate the unemployment rate.
- Suppose that 3 million more people, who did not have a job but wanted to work, stopped looking for work. Calculate the new labor force participation rate and the new unemployment rate. Does this point to a flaw in the unemployment rate; or, at the least, the need for further investigation when interpreting the rate?
Answers: 80%; 12.5%; 75.7%, 7.5%
Problem 6.1.3: Consider the breakdown of citizens in the small nation of the Democratic Republic of Mercyhurst. Please note that each person belongs to at most one category.
| Group | Number (thou.) |
| (Happily) Employed | 400 |
| Unemployed | 25 |
| Employed Part-time for Economic Reasons | 75 |
| Discouraged Workers | 50 |
| Retired People | 200 |
| Children | 300 |
Answers: 66.7%; 5.0%; 65.3%, 3.1%
External Resources
Khan Academy: Unemployment Rate Primer
6.2 patterns of unemployment
Review Activities
Practice Problems
No problems for this section.
External Resources
No external resources for this section.
6.3 what causes unemployment?
Review Activities
Directions: For each of the following unemployed people, determine what type of unemployment they are facing.
Practice Problems
No problems for this section.
External Resources
Khan Academy: Natural, Cyclical, and Frictional Unemployment Rates