Answers to Homework #3
Due March 31, 2008
On your homework please include at the top of the first page your name, TA name,
and the section number for the discussion section you attend. All homeworks should
be legible and neat: do a professional looking job!
Question 1. Unemployment.
In 2007, there were 2,500,000 adults in China.
1,800,000 of the adults were employed; 500,000 were unemployed; 100,000 were
discouraged workers; and 100,000 were not working or seeking jobs in 2007. Among
the unemployed, 390,000 were engaged in job search, and 100,000 were in the labor
markets where the number of people seeking jobs is more than the number of jobs
a. What are the labor force and unemployment rates in 2007?
Labor force = Employed + Unemployed = 1,800,000 + 500,000 = 2,300,000.
Unemployment rate = (Unemployed/Labor force) 100% = (500,000/2,300,000)100%
b. What is the frictional, structural, and cyclical unemployment in 2007? What is the
natural rate of unemployment in 2007?
Frictional unemployment = 390,000
Structural unemployment = 100,000
Natural unemployment = Frictional unemployment + Structural unemployment =
Cyclical unemployment = Actual unemployment – Natural unemployment = 10,000
Natural rate of unemployment = (Natural unemployment / Labor force) 100% =