Question

Xenia has 10,000 people. Of this population, 1,000 residents are below age 16, and 2,000 have given up looking for work. Currently, 500 people are unemployed but are actively looking for work; 2,500 work part time, and the rest are fully employed. Suppose some of those who had given up looking for work start looking again. The unemployment rate will:

Answer 1

Answer:

The answer is: The unemployment rate will increase

Explanation:

To calculate unemployment rate we use the following formula:

Unemployment Rate = Number of Unemployed People / Labor Force (unemployed + employed people)

To be considered unemployed, a person must be without a job, but actively looking for one.

The unemployment rate (UR) for Xenia would be:

UR = unemployed / (unemployed + part time workers + full time workers)

UR = 500 / 7,000 = 7.14%

Currently there are 2,000 people that are not considered unemployed since they are not working but they aren't looking for a job either. For example, if 500 of those would start looking for job and became unemployed, the new unemployment rate (UR) would be: 1000 / 7,500 = 13.33%.

So if more people start looking for a job, the unemployment rate will increase.