Economics - Economics Section 2
- 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.
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 unemployed | 80 |
The unemployment rate in the economy is closest to:
- Option : C
- Explanation : Unemployment rate = (Unemployed / Labor force) * 100 = (190 / 1500) * 100 = 12.6%.
23. The unemployment rate is best described as the ratio of unemployed to:
- 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.
25. Which of the following is the most appropriate reason why unemployment lags business cycle?
- Option : A
- Explanation : To reduce costs related to hiring and firing, businesses are reluctant to dismiss and hire workers.
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