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Worked free response question on unemployment | APⓇ Macroeconomics | Khan Academy - YouTube
Channel: Khan Academy
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we are told the following table shows
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labor market data for country x and they
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tell us how many are employed
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frictionally unemployed structured
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unemployed cyclically unemployed and
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also not in the labor force
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so this first question here and actually
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we skipped part a because we want all of
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these to focus on our labor force so
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calculate the unemployment rate in
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country x show your work
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so pause this video and see if you can
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work through that
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all right so our unemployment rate is
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going to be equal to
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our number unemployed
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unemployed
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which is going to be the sum of the
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friction unemployed structure unemployed
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and cyclically unemployed divided by
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our total labor force so our labor force
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is going to be our employed plus
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unemployed so it's going to be number
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employed
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employed
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plus number unemployed unemployed
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and we want to express this as a
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percentage and since they're asking us
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to show our work we could even put that
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there times 100 it never hurts to give
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more clarity when someone asks you to
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show your work and so what's this going
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to be our number unemployed is going to
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be ten thousand plus five thousand plus
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five thousand actually let me just write
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this
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10k plus five k
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plus five k
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over our employed is 180 k and then our
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number unemployed is going to be plus
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10k
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plus 5k
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plus 5k times 100
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which is equal to in our numerator we
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have 20 000. i'll just write it out here
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twenty thousand our denominator we have
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two hundred thousand
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two hundred
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thousand
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times
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one hundred percent
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and so this is going to all this is
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going to be
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0.10 and then times 100
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this is going to be equal to a 10
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unemployment rate all right now part c
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calculate the labor force participation
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rate in country x
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show your work so once again pause the
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video and see if you can figure that out
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so let's just remind ourselves what our
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labor force participation is
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it is going to be our labor force
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labor force
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we could say number in the labor force
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and then over our total eligible
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population so you could say number
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in or so i would say labor force
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labor
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force
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plus not in labor for plus the number
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not
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in
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labor force and you might say well when
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you're this denominator is the eligible
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population who's not eligible would be
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people who are not of working age it
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might be people who are incarcerated or
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induced institutionalized in some way it
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could be people in the military so then
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and of course we want to express this as
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a percentage so right times 100 percent
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is equal to
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so our labor force is going to be all of
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the employed or unemployed people so
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this is going to be it's essentially
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this denominator right over here so it's
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going to be 200 000
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that's our labor force divided by
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our labor force which is 200
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000 plus the not in the labor force so
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that's 100 000 and of course times 100
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percent and this is going to be equal to
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two-thirds times 100 percent and so we
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could write 66.7
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it would be 66.6 repeating but 66.7
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percent
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is our labor force participation rate
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fair enough
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now part d
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draw a correctly labeled graph of the
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production possibilities curve for
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country x with consumer goods on the
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horizontal axis and capital goods on the
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vertical axis indicate a point on your
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graph labeled z that reflects the
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current level of unemployment pause your
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video and see if you can do that
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all right now let's do that together
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i'll scroll down a little bit so i have
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space to do that
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so
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they tell us
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with consumer goods on the horizontal
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axis so let me do it like that so my
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horizontal axis
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i am going to have consumer goods
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consumer
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goods
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and then they say capital goods on the
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vertical axis
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so it might look something like this
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this is capital goods
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capital
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goods
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on my vertical axis and it's production
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possibilities curve and so they
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typically look something
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like this
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now
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they say
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indicate a point on your graph labeled z
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that reflects the current level of
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unemployment
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so this is very interesting you might
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say hey it's a point on my graph maybe i
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need to put it on this curve someplace
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and that would not be the case here
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because we have some level of cyclical
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unemployment
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you see it right over here cyclical
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unemployment we are we are producing
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below our our our potential i guess is
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one way you could say it so that means
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we would be behind the production
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possibilities curve so that point
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labeled z
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labeled z i'd put it someplace behind
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the curve and to get to get credit for
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this anywhere behind the curve would
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suffice so you could put it right there
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our point z and since they're asking us
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to show our work and it's always good to
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to do things properly so if if they're
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grading this on an ap test for example
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you would get points it's always good to
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put a title to so you could say
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production possibilities curve
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for
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country
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country x and we're done
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