Write the equation that relates income per capita (Y/Pop) with the three main indicators of the labour market. Consider an economy where the productivity per worker (Y/E) remains constant. Suppose that there is an increase in the number of unemployed (U) that has no impact on the unemployment rate. Elaborate on equations to answer:

(i) What other population group must have changed in order for the unemployment rate to remain unchanged (despite the increase in the group of unemployed people)?

(ii) Do you expect any change in the participation rate? What about the employment rate?

(iii) Which of the two indicators (the participation rate or the employment rate) do you expect to have changed more intensively? Why?

(MH) Do you expect the standard of living (captured by income per capita, Y/Pop) to be better or worse off after the change in U? Explain how the rise of U altered income per capita in this case.