A country with a civilian population of 120,000 (all over age 16) has 100,000 employed and 12,000 unemployed persons. Of the unemployed, 7,000 are frictionally unemployed and another 2,000 are structurally unemployed. On the basis of this data, answer the following questions: (show your work for credit) a. what is the size of the labor force? b. What is the unemployment rate? c. What is the natural rate of unemployment for this country? d. Is this economy in recession or expansion? Explain.

a). Labor force=112,000

b). The unemployment rate=10.71%

c). Natural rate of unemployment=8.04%

d). d). The economy is in an expansion since the existence of a natural rate of unemployment implies that the economy is growing and healthy

Explanation:

a). The size of the labor force can be calculated using the formula below;

Labor force=Total number of employed+total number of unemployed

where;

Total number o employed persons=100,000

total number of unemployed=12,000

replacing;

Labor force = (100,000+12,000) = 112,000

b). The unemployment rate can be calculated as;

Unemployment rate = (number of unemployed persons/labor force) * 100

where;

number of unemployed persons=12,000

labor force=112,000

replacing;

Unemployment rate = (12,000/112,000) * 100=10.71%

The unemployment rate=10.71%

c). The natural rate of unemployment can be expressed using the formula below;

Natural rate of unemployment = (Frictionally unemployed+structurally unemployed) / labor force*100

where;

Frictionally unemployed=7,000

structurally unemployed=2,000

labor force=112,000

replacing;

Natural rate of unemployment={ (7,000+2,000) / 112,000}

Natural rate of unemployment=8.04%

d). The economy is in an expansion since the existence of a natural rate of unemployment implies that the economy is growing and healthy