ECON MACRO
5th Edition
ISBN: 9781337430401
Author: William A. McEachern
Publisher: Cengage Limited
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Question
Chapter 7, Problem 1.1P
To determine
Impact of unemployed workers on the labor force participation rate, size of labor force, and
Introduction:
Labor force participation rate refers to the proportion of the working age population available for work and actively seeking work. It is determined by dividing the labor force by the total population.
Size of labor force refers to the total number of people in the working age group available for work.
Unemployment rate is the proportion of the unemployed people in the country. It is determined by dividing the number of unemployed people by the labor force.
Expert Solution & Answer
Explanation of Solution
a. Due to 2 million unemployed workers who decided to return to the school, the labor force participation rate will decrease because labor force includes those people who are actively seeking the work. These have decided to return to the full-time school, so they are no longer the part of labor force.
b. The size of the labor force will decrease because labor force does not include people who are not seeking the work.
c. The unemployment rate will increase because the size of the labor force has decreased, and unemployment rate is determined by dividing the number of unemployed people by the labor force.
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Short Description
Fiscal Policy
Graph Details
Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis.
The x-axis is scaled from 0 to 800 billion dollars with an increment of 40 billion dollars, and the y-axis is scaled from 30 to 150 units with an increment of 5 units.
Object Details
On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (160, 70)Point 2 at (720, 140)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (80, 110)Point 2 at (640, 40)A vertical Long-run Aggregate Supply, LRAS with two endpoints:Point 1 at (400, 145)Point 2 at (400, 30)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (720, 60)Point 2 at (160, 130)Two Reference Points:Lines AS, AD, and LRAS intersect at (400, 100)Lines AS and AD1 intersect at (280, 85)
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