Reference no: EM13851742

Working at home (preparing meals, taking care of children is not counted as part of GDP. Such work also doesn't constitute employment in labor- market statistics. With these observations in mind, consider two economies, each with 100 people, divided into 25 households, each with 100 people, divided into 25 households, each composed of 4 people. In each household, one person stays at home and prepares the food, 2 people work in the non food sector, and one is unemployed. Assume that the workers outside food preparation produce the same actual and measured output in both economies.

In the first economy, Eat- in, the 25 food preparations workers (one per house hold) cook for their families and do not work outside the home. All meals are prepared and eaten sat home. The 25 food preparations workers in this economy do not seek work in the formal labor market (and when asked, they said they're not look in for work). In the second economy, Eat Out, the 25 food preparations workers are employed by restaurants. All meals are prepared in restaurants.

Calculate the measured employment and unemployment and the measured labor force for each economy. Calculate the measured unemployment rate and participation rate for each economy. In which economy is GDP higher?