The economy consists of the following:
- working-age population: 20M
- full time employment: 8M
- part-time employment: 2M (1M of whom wish they had full-time jobs)
- unemployment: 1M
If 0.6M of those unemployed are frictionally, structurally, and seasonally unemployed, what is the natural rate of unemployment?
I am not too sure how to calculate the natural rate of unemployment. My best guess is use 0.4M (1M of unemployed minus 0.6M) and divide it by the labour force. Can someone help me on this question please.
And a following question asks for the cyclical unemployment. In order to do that, is it the actual unemployment rate minus the natural unemployment rate?
there is no way to calculate, as there is no "natural way". get a green card and pick produce, forget the numbers and survive.
The .6M value is the number of "natural unemployeed" persons. Unemployment rate is unemployment divided by the work force. The work force is the number of working (full or part time) plus the number that want to work. Take it from here.
To calculate the natural rate of unemployment, you need to determine the number of individuals who are structurally, frictionally, and seasonally unemployed. In this case, you are given that 0.6M of the total unemployment figure is due to these factors.
To find the natural rate of unemployment, you can subtract the number of individuals who are cyclically unemployed from the total unemployment. The remaining number will represent the natural unemployment rate.
To calculate the cyclical unemployment, you subtract the natural unemployment rate from the actual unemployment rate. The actual unemployment rate is the total number of unemployed individuals divided by the labor force.
In the given information:
- Working-age population: 20M
- Full-time employment: 8M
- Part-time employment: 2M (1M of whom wish they had full-time jobs)
- Unemployment: 1M
To calculate the natural rate of unemployment, first, determine the number of individuals who are cyclically unemployed:
Cyclical unemployment = Actual unemployment - Natural unemployment
Substituting the given values:
Cyclical unemployment = 1M - 0.6M
Cyclical unemployment = 0.4M
Now, to find the natural unemployment rate, divide the natural unemployment by the labor force:
Natural unemployment rate = Natural unemployment / Labor force
Labor force = Full-time employment + Part-time employment + Unemployment
Substituting the given values:
Labor force = 8M + 2M + 1M
Labor force = 11M
Natural unemployment rate = 0.6M / 11M
Natural unemployment rate ≈ 0.0545 or 5.45%
Therefore, the natural rate of unemployment is approximately 5.45%.
To calculate the cyclical unemployment rate, subtract the natural unemployment rate from the actual unemployment rate:
Cyclical unemployment rate = Actual unemployment rate - Natural unemployment rate
Actual unemployment rate = Total unemployed / Labor force
Using the given values:
Actual unemployment rate = 1M / 11M
Actual unemployment rate ≈ 0.0909 or 9.09%
Cyclical unemployment rate = 9.09% - 5.45%
Cyclical unemployment rate ≈ 3.64%
Therefore, the cyclical unemployment rate is approximately 3.64%.