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 'If the labour force and the unemployed population increase by the same number, the unemployment rate remains unchanged

Economics Nov 07, 2020

 'If the labour force and the unemployed population increase by the same number, the unemployment rate remains unchanged.' Evaluate the statement. (3 marks

Expert Solution

In order to verify the statement, let us take an example. Suppose that the labour force is 100 and the number of unemployed is 20. The unemployment rate is 20/100 × 100 = 20%. Suppose the labour force increases by 10 to 110, and number of unemployed also increases by 10 to 30. The new rate of unemployment is 30/110 ×100 = 27.27%. This new unemployment rate is different from the initial unemployment rate, although both the labour force and the number of unemployed increased by the same number. Therefore, the given statement is not true.

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