The economy has a total population of 100 25 of which are unemployed and 20 of which are out of the ...........

Economics- Phase (I & II) Inflation and Phillips Curve

The economy has a total population of 100; 25 of which are unemployed, and 20 of which are out of the labor force. What is the unemployment rate?

20%

25%

45%

None of the Above

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Explanation:

The information not explicitly stated is the number employed. To get this number, you should subtract total population by the 25 unemployed and 20 out of labor force to get 55. Total labor force is the sum of those employed (55) and unemployed (25), which totals to 80. Alternatively you can calculate total labor force by subtracting total population (100) by the 20 out of the labor force to also arrive at 80. By definition unemployment rate is the fraction of the labor force unemployed. Dividing 25 by 80 gives 0.235, or 23.5%, which is not one of the choices given above.