Suppose an economy has 150 million people employed, 10 million people unemployed, and 40 million people not in the labor force. What is the unemployment rate for this economy?

• A. 8.00%
• B. 5.00%
• C. 6.25%
• D. 20.00%

Answer: (C)

Verified step by step guidance

1. Identify the number of employed people, unemployed people, and those not in the labor force. Here, employed = 150 million, unemployed = 10 million, and not in labor force = 40 million.
2. Calculate the labor force by adding the number of employed and unemployed people: \(\text{Labor Force} = \text{Employed} + \text{Unemployed}\).
3. Use the formula for the unemployment rate, which is the percentage of the labor force that is unemployed: \(\text{Unemployment Rate} = \left( \frac{\text{Unemployed}}{\text{Labor Force}} \right) \times 100\).
4. Substitute the values into the formula: \(\text{Unemployment Rate} = \left( \frac{10}{150 + 10} \right) \times 100\).
5. Simplify the fraction and multiply by 100 to find the unemployment rate as a percentage.