Question

Assume the labor force is composed of 180,000 persons, with 18,000 persons unemployed. Showing all calculations, compute the official unemployment rate. 1B. Assume that of the 18,000 persons unemployed, 6,000 become discouraged and quit looking for employment. Showing all calculations, compute the actual unemployment rate. 1C. Argue which measure of unemployment is a more accurate measure of unemployment, the official unemployment rate or the actual unemployment rate.

Answer 1

To calculate the official unemployment rate, divide the number of unemployed persons by the labor force and multiply by 100. To calculate the actual unemployment rate, subtract the number of discouraged workers from the labor force and divide the number of unemployed persons by the adjusted labor force. The actual unemployment rate is considered more accurate as it includes discouraged workers.

Step-by-step explanation:

To calculate the official unemployment rate, divide the number of unemployed persons by the labor force and multiply by 100. In this case, the unemployment rate would be:

• Unemployment rate = (18,000 / 180,000) * 100 = 10%

To calculate the actual unemployment rate, subtract the number of discouraged workers (who quit looking for employment) from the labor force and then divide the number of unemployed persons by the adjusted labor force:

• Adjusted labor force = Labor force - Discouraged workers = 180,000 - 6,000 = 174,000
• Actual unemployment rate = (18,000 / 174,000) * 100 = 10.34%

The official unemployment rate measures the percentage of unemployed persons in the labor force, while the actual unemployment rate takes into account discouraged workers who have quit looking for employment. The actual unemployment rate is considered a more accurate measure as it provides a more complete picture of unemployment.