Business Studies
Respond to the following in a minimum of 175 words:
Describe the formula(s) used to determine the unemployment rate.
Describe how inflation is measured using the Consumer Price Index (CPI).
ANSWER
Calculating Unemployment Rate
Unemployment is the percent of the labor force that is jobless. It is also called a lagging indicator which means it rises and falls when there is a change in the economic situation, rather than anticipating them. When the economy is not in good shape, and there are limited jobs, the unemployment rate increases. The primary unemployment rate is called U-3, which evaluates unemployed individuals as those who are willing and ready to work, and those who have actively sought to operate within the past few weeks. To calculate the unemployment rate, the number of unemployed individuals is divided by those in the labor force, including the employed and the unemployed. The ratio is calculated as a percentage.
U-3=Labor Force/Unemployed×100
Several people who would like to work but cannot under various circumstances, including disability, are not categorized as unemployed under this system because they are neither employed nor grouped outside the labor force.
Consumer Price Index
The consumer price index is the calculation of the collective price level in a particular economy. It comprises a bundle of commonly acquired goods and services while still measuring the modifications in a nation’s currency’s purchasing power and the price degree of a basket of products and services. The consumer price index evaluates the change in the existing values of the market basket of goods compared to a base period. It is usually computed quarterly or monthly and based on a usual expenditure pattern of urban residents and involves people of all ages. An index of 110 determines that there has been a 10 percent increase in the price of the market basket compared to the reference period.
