Question

If the average worker produces $60,000 of gdp, by how much will gdp change if there are 70 million labor force participants and the unemployment rate changes from 5.5 to 5.0 percent?

GDP will____ by____billion

Answer 1

GDP will increase by $21 billion due to a 0.5% decrease in the unemployment rate, with the average worker's contribution considered.

Step-by-step explanation:

GDP can be calculated by determining:

The change in GDP can be calculated by determining the change in the number of employed workers and then multiplying that number by the average productivity per worker. First, the initial number of unemployed workers can be found with an unemployment rate of 5.5% for a labor force of 70 million, which equals 3.85 million. Decreasing the unemployment rate to 5.0%, the unemployed becomes 3.5 million. The change in employment is therefore 0.35 million workers returning to work. These workers each produce $60,000 of GDP, so multiplying by the change in employment gives a $21 billion increase in GDP.

Now, we can calculate the change in GDP: Change in GDP = (Change in labor force participants) * (Average worker GDP) * (Change in unemployment rate) = 0 million * $60,000 billion * -0.5% Therefore, the change in GDP will be $0 billion.