Macro Module 11 Unemployment rate practice exam questions

●    The labor market is at the natural unemployment rate in December 20XX, with a job finding rate of 7.63% per month and a job separation rate of 1.61% per month.
●    On January 1, 20XX+1, with the onset of a recession, the job finding rate changes to 6.68% per month, and the job separation rate does not change.


Question 11.1: Natural unemployment rate

What is the natural unemployment rate in December 20XX?

Answer 11.1: 1.61% / (7.63% + 1.61%) = 17.42%

(natural unemployment rate = job separation rate / (job finding rate + job separation rate) )


Question 11.2: Unemployment rate after one month

What is unemployment rate on February 1, 20XX+1, after one month of the new job finding rate?

Answer 11.2: 17.42% × (1 – 6.68%) + (1 – 17.42%) × 1.61% = 17.59%

(Between January 1, 20XX+1, and February 1, 20XX+1, 17.42% × (1 – 6.68%) unemployed workers remain without jobs and (1 – 17.42%) × 1.61% employed workers lose their jobs.)



Question 11.3: Natural unemployment rate

What is the natural unemployment rate in February 20XX+1?

Answer 11.3: 1.61% / (6.68% + 1.61%) = 19.42%

(natural unemployment rate = job separation rate / (job finding rate + job separation rate) )