Question

A friend and fellow student shares her employment experience over the last 12-week summer break. It took her one full week to find a job. She started on the first day of week two and was able to keep her job for the remaining eleven weeks.

Use this information to answer the following three questions, assuming the unemployment rate is not changing:
1. Calculate the rate of job finding (f) for the summer, using an average rate per week. Note that if f is the rate of job finding, then the average spell of unemployment is (1/f).
2. Calculate the rate of job separation (s), using an average rate per week. Note that if s is the rate of job separation, then the average length of employment is (1/s).
3. Calculate the natural rate of unemployment (U) using the above results.

Answer 1

A- 12

B- 1.09

C- 52.15%

Step-by-step explanation:

A. The job finding rate (f) is the fraction of unemployed individuals who find a job each month. (f) is thus the inverse of the average spell of unemployment. Spell of unemployment was 1/12. Knowing that 1/12 is 0.083, then inverse it. 0.083^-1 = 12.

B. Separation Rate would be 11/12 or 0.917. Take the inverse of that 0.917^-1 = 1.09

C. natural rate of unemployment = rate of job separation / (rate of job separation + rate of job finding) = 1.09/1+ 1.09 = 52.15%. this shows that natural and unemployment is 52.15%.