L03 Concept_Test

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South Piedmont Community College *

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102

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Economics

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Feb 20, 2024

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Lesson 3 ConcepTest This ConcepTest has 4 questions. Use the labor statistics data in the table below to answer questions 1-3. Assume that 4 million unemployed individuals become “discouraged” and decide not to look for a job anymore. Adult Population (millions) 220 Unemployed (millions) 12 Employed (millions) 135 1. What was the unemployment rate before and after the 4 million unemployed individuals became discouraged?  The total Labor force would be 147 million. We get this number by taking the numbered of employed (135 million) and adding it with the number of unemployed (12 million) o 135 + 12 = 147  To find unemployment we have to divide unemployed (U) by Labor Force (LF) and multiple by a hundred. Before discouraged. After Discouragement U/LF x100 135 + 8 (you get 8 from subtracting 4 from 12) (12/147) x 100 (8/143) x 100 = 8.16% = 5.59% 2. What was the labor force participation rate before and after the 4 million unemployed individuals became discouraged?  Labor force pr = labor force/working age population x100 Before After = 147/220 x 100 = 143/220 x 100

= 66.82% = 65% 3. Using your answers from above, explain why one should not look only at a single economic indicator when trying to explain changes in the labor market.  I believe, after reviewing questions one and two, it is clear that unemployment rate alone cannot be used as a sufficient measure to explain changes in the labor market. Furthermore, after reviewing question number two it becomes clear that the difference between labor force participation only changed marginally after four million people gave up looking for a job. However, if we were to look at just the unemployment rate we could be falsely led to believe that unemployment was getting better due to the lower percentage presented after four million people gave up, which does not necessarily represent the truth. Therefore, I think we should take into account multiple indicators before explaining any changes in the labor market. 4. How do you think an increase in unemployment insurance would affect unemployment rates? Explain speaking about at least one type of unemployment.  I think unemployment insurance incentivizes individuals to stay at home and look for jobs rather than accept a position and start contributing to the workforce. Therefore, leading to a higher unemployment rate. I believe this is a form of institutional unemployment. This form of unemployment typically occurs when

certain government policies are in place and there are large social benefit programs that discourage individuals from finding employment.

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