Suppose the working age population is 100 million. 10 million are not available for work, 5 million are available for work but not currently working or looking for work, and 10 million are unemployed. Suppose the rest are employed. What is the labor force participation rate?

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BlackTom AI · Accepted Answer

We start by identifying the components of the working age population and how many are in the labor force.

- Working age population: 100 million.
- Not available for work: 10 million. These are outside the labor force.
- Available for work but not currently working or looking for work: 5 million. These are also outside the labor force.
- Unemployed: 10 million. These are part of the labor force but not employed.

Next, determine how many are employed. Subtract those not in the labor force (not available + available but not active) and the unemployed from the working age population:
- Employed = 100 million − (10 million + 5 million + 10 million) = 75 million.

Now compute the labor force, which is the sum of employed and unemployed:
- Labor force = 75 million (employed) + 10 million (unemployed) = 85 million.

Finally, calculate the labor force participation rate, defined as the labor force divided by the working age population:
- Participation rate = 85 million / 100 million = 0.85 = 85%.

Evaluating the options:
- 75%: This would imply a labor force of 75 million, which ignores the 10 million unemployed and miscounts the employed share.
- 90%: This would require a larger labor force than calculated, inconsistent with the given numbers.
- 85%: This matches the computed 85 million in the labor force out of 100 million working-age people.
- 80%: This would correspond to 80 million in the labor force, which is not supported by the data.

Therefore, the third option, 85%, correctly reflects the labor force participation rate given the scenario.

ECON 2002.01 AU2025 (21333) Final Exam- Requires Respondus LockDown Browser

Suppose the working age population is 100 million. 10 million are not available for work, 5 million are available for work but not currently working or looking for work, and 10 million are unemployed. Suppose the rest are employed. What is the labor force participation rate?

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