Question

The economy enters a recession. Employment falls by 4%, and the number of hours per week worked by each employed worker falls by 2.5%. In addition, 0.2% of the labor force becomes discouraged at the prospect of finding a job and leaves the labor force. Finally, suppose that whenever total hours fall by 1%, total output falls by 1.4%.

During the recession, what is the size of the laborforce? How many workers are unemployed and what is the unemploymentrate?What is the total output per week in the economy? What is thelaborproductivity per hour? What is the labor productivity perworker ina week?

Answer 1

Size of labor force = 1,996 workers

Number of unemployed workers = 172

Unemployment rate = 8.62%

Total output per week = 686,462.4 units

Labor productivity per hour = 9.65 units

Labor productivity per worker in a week = 376.35 units

Step-by-step explanation:

Assuming the following missing information:

Number of workers = 2,000

Employed workers - 1,900

Hours worked per week = 40 hours

Output per labor hour = 10 units

During the recession:

Size of labor force = 2,000 - 2,000(0.2%) = 1,996 workers

Number of employed workers = 96% x 1,900 = 1,824

Number of unemployed workers = 1,996 - 1,824 = 172

Unemployment rate = (1,996 - 1,872) / 1,996 x 100 = 8.62%

Total output per week

= Number of workers x Hours worked x Output per labor hour

= 1,824 x 40(97.5%) x 10[100% - 1.4%(2.5)]

= 1,824 x 39 x 9.65

= 686,462.4 units

Labor productivity per hour = 686,462.4 / (1,824 x 39) = 9.65 units

Labor productivity per worker = 686,462.4 / 1,824 = 376.35 units