Consider an economy that initially has a labor force of 2000workers. Of these workers, 1900 are employed and each works 40hours per week. Ten units of output are produced by each hour oflabor.
(a) What is the total number of hours worked per week in theeconomy? What is the total output per week in the economy? What isthe labor productivity per hour? What is the labor productivity perworker in a week? What is the unemployment rate?
(b) The economy enters a recession. Employment falls by 4% and thenumber of hours per week worked by each employed worker falls by2.5%. In addition 0.2% of the labor force becomes discouraged atthe prospect of finding a job and leaves the labor force. Finally,suppose that whenever total hours fall by 1%, total output falls by1.4%. During the recession, what is the size of the labor force?How many workers are unemployed and what is the unemployment rate?What is the total output per week in the economy? What is the laborproductivity per hour? What is the labor productivity per worker ina week?