Economics for Decision Making

Running head: ECONOMICS FOR DECISION MAKING
Economics for Decision Making
Name of the Student
Name of the University
Course ID

ECONOMICS FOR DECISION MAKING1
Table of Contents
Question 1........................................................................................................................................2
Question a....................................................................................................................................2
Question b....................................................................................................................................2
Question c....................................................................................................................................3
Question d....................................................................................................................................3
Question 2........................................................................................................................................4
Question a....................................................................................................................................4
Question b....................................................................................................................................5
Question c....................................................................................................................................6
Question 3........................................................................................................................................7
Question a....................................................................................................................................7
Question b....................................................................................................................................9
Question c..................................................................................................................................10
References......................................................................................................................................12

ECONOMICS FOR DECISION MAKING2
Question 1
Question a
i.
The current unemployment rate in Tommynation is recorded as 5.2%. Total number of
people in the labor force is 269, 475. As unemployment rate is the percentage of unemployed
people in the labor force, the number of unemployed people in can be computed as
Unemployed people=Labor force × rate of unemployment
¿ 269,475 ×0.052
¿ 14012.7 14013
ii.
The working wage population is given as 365547. The labour force participation rate can be
computed as
Labor force participation rate= Labour force
Working age population × 100
¿ 269475
365547 ×100
¿ 73.7 %
Question b
If the size of labour force decreases with number of unemployed people remaining
unchanged, rate of unemployment would increase (Goodwin et al., 2015). If size of labour force
decreases by 23000, the size of labour force now becomes (269475 – 23000) = 246475

ECONOMICS FOR DECISION MAKING3
The new rate of unemployment in the economy is
Unemployment rate= Number of unemployed people
Labor force ×100
¿ 14013
246475 ×100
¿ 5.7 %
Therefore, as the size of labour force decreases by 23000, rate of unemployment decreases from
5.2% to 5.7%.
Question c
Tim lost his jobs in a manufacturing factory. The factory went bankrupt due to lost
competitiveness in the domestic market over the cheap imported products. Tim is unable to find
a job that utilizes his skills. This type of unemployment is called structural unemployment. Tim
is unemployed because of skill mismatch leading to structural unemployment.
Question d
Full employment refers to an economic state where all available labours in the economy
are fully utilized in an efficient manner. Under condition of full employment, the economy
embodies highest amount of skilled and unskilled labourers. The full unemployment refers to any
level of unemployment that is above 0 percent. Full employment exists without any demand
deficit or cyclical unemployment. The economy’s actual unemployment rate is equal to natural
rate of unemployment (Uribe & Schmitt-Grohe 2017) When all the labour resources are fully
utilized, real GDP matches to the level potential GDP.