In this section we'd like you to read Principles of Macroeconomics: "Chapter 5, Section 3: Unemployment" and then do the following exercise. When done, write your answer in the weblog field, and then check it against the answer key. This reading covers the three types of unemployment: frictional unemployment, structural unemployment, and cyclical unemployment.
Given the data in the table, compute the unemployment rate in Year 1 and in Year 2. Explain why, in this example, both the number of people employed and the unemployment rate increased.
Number employed (in millions)
Number unemployed (in millions)
Enter your answer here:
When you're done, check your answer here.
In Year 1 the total labor force includes 22 million workers, and so the unemployment rate is 2/22 = 9.1%. In Year 2 the total labor force numbers 23.4 million workers; therefore the unemployment rate is 2.4/23.4 = 10.3%. In this example, both the number of people employed and the unemployment rate rose, because more people (23.4 − 22 = 1.4 million) entered the labor force, of whom 1 million found jobs and 0.4 million were still looking for jobs.