AP® Macroeconomics · Free response

Labor force data in Country Y: unemployment and participation rates, discouraged workers and a downturn

write it first, then score yourself point by point

Short free-response question · four-function calculator · 5 points · about 12 minutes

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The question

Name: ______________________   Date: ____________   Labor force data in Country Y: unemployment and participation rates, discouraged workers and a downturn (5 points)

A monthly survey in Country Y, an invented country, sorts its adults into the groups shown in the table.

Data

Labor market survey in Country Y

Country Y, one month (millions of people; invented data for practice)
GroupMillions
Adult population (16 and older, not in an institution or the military)200
Employed114
Unemployed6
Not in the labor force80

  1. (A(i)) Using the data in the table, calculate the unemployment rate in Country Y. Show your work. [1 point]

  2. (A(ii)) Calculate the labor force participation rate in Country Y. Show your work. [1 point]

  3. (B) Suppose 2 million of the unemployed people in the table stop looking for work because they believe no jobs are available, and nothing else changes. Will the unemployment rate increase, decrease or stay the same? Explain. [1 point]

  4. (C(i)) Starting again from the table, total spending in Country Y falls sharply, firms lay off workers, and the unemployment rate rises to 8%. Country Y's natural rate of unemployment is 5%. Identify the type of unemployment that increased. [1 point]

  5. (C(ii)) Calculate Country Y's cyclical unemployment rate after the layoffs. Show your work. [1 point]