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TF12:19 3B19BREAZ eee 2O 88% mm) # owl.uwo.ca Page 8 of 18 o QUESTION 7 (10 marks) Suppose that a country has two types of
TF12:19 3B19BREAZ eee 2O 88% mm) # owl.uwo.ca Page 8 of 18 o QUESTION 7 (10 marks) Suppose that a country has two types of workersyoung workers and older workers. Young workers make up 10 percent of the labour force and normally have a group unemployment rate of 15 percent. Older workers comprise the rest of the labour force and normally have a group unemployment rate of 5 percent. Suppose the economy is operating at full employment. a) What is the country's natural rate of unemployment? b) If twenty years earlier, the country experienced a baby boom such that the labour force composition of young workers now suddenly jumps to 20 percent, what is the country's new natural rate of unemployment? Comment on your calculations. Page 9 of 18
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