MEEB (2022-23) Handout 02

Measures of Output, Price Level and Employment/Unemployment

A. CIRCULAR FLOW OF INCOME AND EXPENDITURE

1. An economy can be defined as an integrated system of production, exchange and consumption. In carrying out these
economic activities, people are involved in making transactions – they buy and sell goods and services. Economic
transactions generate two kinds of flows: (i) product flow or goods & services flow; and (ii) money flow. Product
and money flow in opposite directions in a circular fashion. The product and money continue to flow incessantly.
This makes the economy.
2. The entire economic system can therefore be viewed as circular flow of factor incomes and expenditure. Magnitude
of these flows, in fact, determines the size of national income.
3. It may be noted at the outset that the flow mechanism of goods and money is extremely complex in reality. The
economists, however, use simplified models to illustrate the circular flows of income and expenditure. To present the
flows of goods and money, the economy is divided into four sectors: (i.) household sector; (ii.) business sector or the
firms; (iii.) government sector; and (iv.) foreign sector or rest of world (ROW).

4. Circular flows in the economy is presented through simplified diagram below:

 Households own and supply factors of

production, i.e., land, labour, capital and
entrepreneurship to firms for production
of goods and services. Firms make factor
payment to households in form of rent,
wages, interest and profit. Households
also supply factors to government and
foreign sector for which they receive
factor payments.
 Household savings flow to firms through
capital market/financial sector in form of
investment.
 Firms produce and supply goods and
services to households, government and
foreign sector for which they receive
money payments.
 Households pay direct taxes to
government.
 Businesses/firms pay direct and indirect
taxes to government and receive
subsidies from the government.

 The economic role of the government, in the context of the circular flow model, refers to transferring household
income to the government through taxation and government expenditure which makes tax revenue flow back to the
households.
 Taxation is the withdrawal from the income flows to the households because they reduce private disposable income
and, therefore, consumption expenditure and savings. On the other hand, government expenditure is an injection into
the income stream. The government expenditure adds to the aggregate demand in form of government purchases of
factor services from the households and goods and services from the business sector. The transfer payments by the
government (e.g., old age pension, subsidies, unemployment allowance, etc) are injections to the circular flows.
They add to the household income which leads to increase in household demand for consumer goods.
 The foreign sector consists of two kinds of international transactions: (i) foreign trade, i.e., exports and imports of
goods and services; and (ii) inflow and outflow of capital. The international transactions take place through a
complex system. For simplicity sake, however, following assumptions are made:
o The external sector consists of only exports and imports of goods and services.
o The export and import of goods and non-labour services are made only by the firms; and
o The households export only labour.
 Exports make goods and services flow out of the country and make money (foreign exchange) flow into the country
in the form of ‘receipts from export’. This is, in fact, flow of foreign income into the economy. Thus, exports
represent injection into the economy.
 Similarly, imports make flow of goods and services from abroad and flow of money (foreign exchange) out of
country. This is flow of expenditure out of the economy. Imports represent withdrawal from the circular flow of the
economy.
 Another flow of income is generated by the ‘export of manpower’ by the households. The export of manpower
brings in foreign remittances in terms of foreign exchange. This is another inflow of income. These inflows and
outflows go on continuously so long as there is foreign trade and export of manpower.
 So far as the effect of foreign trade on the magnitude of the overall circular flow is concerned, it depends on the
trade balance, which equals export minus import.

5. Withdrawal (leakages) and Injections:

o Withdrawal (or leakage) is income which is generated in the production of the national output and which does
not become a part of the circular flow of income. There are three types of withdrawals in an economy—saving,
taxes and imports. Withdrawals lead to a decrease in the circular flow of income.
o Injection is an amount of money which is spent by the different sectors in the economy. It is in addition to their
incomes generated in the circular flow of income. There are three types of injections in an economy—
investment, government expenditure and exports. Injections result in an addition to the circular flow of income.
o If injections are greater than the leakages, the circular flow will grow and there is prosperity in the economy.
o If injections are less than leakages, the circular flow will become smaller in size and there is a recession in the
economy. In equilibrium, leakages are equal to the injections and the size of the circular flow remains the same.

6. Sources of macroeconomic data:

Data source Description of available data
www.mospi.gov.in National income and related data, Consumer Price Index and inflation
www.indiabudget.gov.in Economic Surveys and Union Budgets for various years
www.eaindustry.nic.in Wholesale Price Index and Inflation
www.worldbank.org World Development Report, World Development Indicators, etc
www.rbi.org.in Monetary policy instruments including policy rates

B. MEASUREMENT OF NATIONAL OUTPUT

Every society has human beings who have needs/wants for commodities (goods and services) which should be satisfied.
Every society has some mechanism or system to satisfy human needs/wants for commodities (goods and services). Such
system can be termed as economic system or economy (Economy/economic system is a mechanism for production,
exchange and consumption of commodities - goods and services). Thus, commodities (goods and services) should be
produced for satisfying human needs/wants. Some of the commodities (goods and services) are produced and supplied by
government or government enterprises while others are produced and supplied by private enterprises or firms (a firm is
an entity which mobilizes resources for production of commodities - goods and services - for transaction in the market to
earn profit). Quantity of commodities (goods and services) available in an economy determines the extent to which
human needs/wants can be satisfied. Quantity and variety of available commodities (goods and services) should increase
over the period because of increase in population, and increase in quantity and variety of human wants. Whether quantity
of commodities (goods and services) is increasing or not over the period can be known by comparing the quantity of
commodities (goods and services) produced during different periods. Thus, we should be able to measure the quantity of
commodities produced in the economy in order to make such comparison. Since a variety of commodities are produced
in the economy, how to find out total quantity of commodities produced in the economy? We need a common measuring
rod. Money is such measuring rod. Different commodities (goods and services) are valued in monetary terms and then
summed up to find out the value of total quantity of commodities (goods and services) produced in the economy.

What happens to these commodities after being produced? Commodities are sold to the buyers. The buyer may, in turn,
be an individual/household or an enterprise/firm or government and the commodities purchased by that entity might be
for final use or for use in further production. Such an item that is meant for final use and will not pass through any more
stages of production or transformation is called a final good. Why do we call this a final good? Because once it has been
sold it passes out of the active economic flow. It will not undergo any further transformation at the hands of any
producer. It may, however, undergo transformation by the action of the ultimate purchaser during their consumption. Of
the final goods, we can distinguish between consumption goods and capital goods. Goods that are consumed when
purchased by their ultimate consumers are called consumption goods or consumer goods. Then there are other goods
(capital goods) that are of durable character which are used in the production process. They are also final goods yet they
are not final goods to be ultimately consumed. These goods form a part of capital, one of the crucial backbones of any
production process. As final goods they do not undergo any further transformation in the economic process. Of the total
production taking place in the economy a large number of products don’t end up in final consumption and are not capital
goods either. Such goods may be used by other producers as material inputs. These are intermediate goods (also known
as intermediate consumption). Thus we consider all the final goods and services produced in an economy in a given
period of time. They are either in the form of consumption goods (both durable and non-durable) or capital goods. As
final goods they do not undergo any further transformation in the economic process. Only final goods and services
should be counted and intermediate goods should be excluded while assessing the quantity of goods and services
(commodities) produced in the economy. Including intermediate goods will lead to double counting which will
exaggerate the total goods and services produced in the economy. Value of final goods and services produced in the
economy in a year is nothing but Gross Domestic Product (GDP).
Measuring/estimating the GDP:
In India, economic activities are classified into 8 groups (say industries/sectors) as follows:
1. Agriculture, forestry and fishing
2. Mining and quarrying
3. Manufacturing
4. Electricity, gas, water supply and other utility services
5. Construction
6. Trade, Hotels, Transport, Communication & Services related to Broadcasting
7. Financial, Real Estate & Professional Services
8. Public Administration, Defence & Other Services (education, health, recreation, and other personal services)

(I) Value-added and Income approach of measuring GDP

As mentioned earlier, GDP is the value of final goods and services produced in an economy in an accounting year. For
estimating GDP, first of all, GVA at basic prices is estimated for each economic activity group (say sectors). Then, sum
of GVA at basic prices is worked out. Finally, GDP is estimated by adding product taxes to and deducting product
subsidies from the sum of GVA at basic prices. Formula for GDP is given below:

GDP = ∑Gross Value Added (GVA) at basic prices + Product taxes – Product subsidies
GVA at basic prices (value-added approach) = Value of output – Value of Intermediate Consumption
GVA at basic prices (income approach): Compensation of employees + Operating Surplus / Mixed Income +
Consumption of Fixed Capital (CFC) or Depreciation + Production taxes -
Production subsidies

Basic prices: For any commodity, the basic price is the amount receivable by the producer from the purchaser for a unit
of a product minus any tax on the product plus any subsidy on the product. However, GVA at basic prices will include
production taxes and exclude production subsidies available on the commodity because net production taxes (production
taxes minus production subsidies) are part of intermediate consumption.

Product taxes: Product taxes are paid on per unit of output basis. Some examples include Excise duty, sales tax, service
tax, and import and export duties

Product subsidies: Product subsidies are received on per unit of output basis. Some examples include food, petroleum
and fertilizer subsidies, interest subsidies given to farmers, households through banks, and subsidies for providing
insurance to households at lower rates.

Production taxes: Production taxes are paid with relation to production and are independent of the volume of actual
production. Some examples are: land revenues, stamps and registration fees, and tax on profession.

Production subsidies: Production subsidies are received with relation to production and are independent of the volume of
actual production. Some examples include subsidies to railways, input subsidies to farmers, subsidies to village and small
industries, administrative subsidies to corporations or cooperatives, etc

(II) Expenditure approach of measuring GDP

GDP = Private Final Consumption Expenditure (C)
(+) Government Final Consumption Expenditure (G)
(+) Gross Capital Formation (I) which includes Gross Fixed Capital Formation (GFCF) + Change in Stock (CIS)
+ Valuables
(+) Exports of goods and services (X)
(-) Imports of goods and services (M)

Important exclusions from GDP calculation through expenditure approach:

 Transfer payments made by the government to firms and households (subsidies, etc)
 Value of second hand goods transacted in the market
 Transaction of stocks and shares

(III) Nominal vs. Real GDP:

  Nominal GDP: GDP at current prices
 Real GDP: GDP at constant (base year) prices. For example: Real GDP_2020 = Nominal GDP_2020 *
[100/Price Index_2020]
 Similarly, nominal and real value of other national income aggregates are also estimated and reported at both
current and constant (base year) prices.
 Current series of national accounts has 2011-12 as the base year.

(IV) Other National Income Aggregates:

 Net Domestic Product (NDP) = GDP – Consumption of Fixed capital (CFC)

 Net Value Added (NVA) at basic prices = GVA - CFC

 Gross National Income (GNI) = GDP + Net Primary Income from Rest of World (receipts minus payments)
a. Primary Incomes = Compensation of employees + Property and Entrepreneurial Income

 Gross National Disposable Income (GDNI) = GNI + Other net current transfers from Rest of World (receipts
minus payments)

 Net National Income (NNI) also known as National Income = GNI – CFC

 Net National Disposable Income (NNDI) = NNI + Other net current transfers from Rest of World (receipts
minus payments)

 National Income per capita = NNI / Population

 Personal Income=
Net National Disposable Income (NNDI)
(-) Net Disposable Income of General Government
(+) Current taxes on income, wealth etc
(-) Net saving of public corporations
(-) Net saving of Private corporations
(-) Current taxes on income and wealth, paid by corporations

 Household Disposable Income =

Personal Income
(-) Current taxes on income and wealth paid by households

(V) GDP as a welfare measure

 If a person has more income he/she can buy more goods and services and his/her material well-being improves. So it
may seem reasonable to treat his/her income level as his/her level of well-being.
 GDP is the sum total of value of goods and services produced within the country in a year. It gets distributed among
the people as incomes. So we may be tempted to treat higher level of GDP of a country as an index of greater well-
being of the people of that country. But there are some reasons why this may not be correct.
Price increase will overestimate the quantity of goods and services available in the economy over the period.
However, price changes can be accounted for by calculating GDP at constant prices, i.e., Real GDP can be
calculated, rather than Nominal GDP.
Increase in population will reduce the quantity of goods and services available to the average household/person.
Increase in population can be accounted for by calculating per capita GDP.

Can the increase in Per Capita Real GDP of a country be taken as an index of the welfare of the people of that country?
 There are at least 3 reasons why even an increase in Per capita Real GDP of a country cannot be treated as an index
of the welfare of the people of that country.
1. Distribution of GDP – how uniform is it: If the GDP of the country is rising, the welfare may not rise as a
consequence. This is because the rise in GDP may be concentrated in the hands of very few individuals or firms.
For the rest, the income may in fact have fallen. In such a case the welfare of the entire country cannot be said to
have increased.
2. Non-monetary exchanges: Many activities in an economy are not evaluated in monetary terms. For example, the
domestic services women perform at home are not paid for. In barter exchanges, goods (or services) are directly
exchanged against each other. GDP does not account for these exchanges and hence may underestimate the
quantity of goods and services available for satisfaction of human wants in the country.
 3.
Externalities: Externalities (also known as third-party effects) refer to the benefits (or harms) a firm or an
individual causes to another for which they are not paid (or penalized). Externalities do not have any market in
which they can be bought and sold.
a. Negative externalities: For example, oil refinery may be polluting nearby river which may lead to
adverse impact on users of river water, livelihood of fishermen, etc.
b. Positive externalities: For example, government expenditure on healthcare, tree plantation, etc
 GDP does not account for externalities, thus it may overestimate/underestimate the actual welfare of the economy.

(VI) Economic Growth

Economic growth rate can be defined as percentage change in GDP of a country. There are twin concepts of growth, i.e.,
nominal growth rate and real growth rate. Formulae for calculating nominal and real growth rates are given below:

For example:
Nominal growth rate in 2023: [(Nominal GDP in 2023 – Nominal GDP in 2022)/Nominal GDP in 2022] * 100
Real growth rate in 2023: [(Real GDP in 2023 – Real GDP in 2022)/Real GDP in 2022] * 100

(VII) Structural changes in Indian Economy

Structure of an economy refers to the fundamental features of the economy like the size of the primary, secondary and
tertiary sectors in terms of their contribution to GDP and employment. Other important elements of structure are trade
composition (the items that we export and import), saving-GDP ratio (level of savings as a percent of GDP) etc.

Structural change represents the fundamental changes that are occurring in the basic features of the economy over a long
period. Development is described as growth plus structural changes. Structural changes constitute to be the most
important part of development. Structural changes refer to long term and persistent shifts in the sectoral composition of
economic systems. Structure of the economy thus means the occupational structure, sectoral distribution of income,
industrial pattern, composition of exports, saving- GDP ratio etc. In this course, we focus only on percentage contribution
of primary, secondary and tertiary sectors to GDP/GVA.

C. MEASUREMENT OF PRICE LEVEL

Price of individual goods and service is self-explanatory and clearly understandable to everyone. However, we need to
know the price level prevailing in an economy. Price level at the level of economy is termed as ‘general price level’ or
simply ‘price level’. Ideally, prices of all goods and services should be considered while measuring the price level at
macro level. Since very large number of goods and services is produced, sold and consumed in an economy, it may not
be feasible for the government to regularly capture and report all prices in the economy. Thus, the general price level is a
measure of overall prices for some set of goods and services (not all) in an economy. Price level is measured by using
price level index. An example of measuring price level through price index is elaborated below:

Example: Suppose, only 4 commodities are produced, sold and consumed in an economy. Commodities are assigned
weights based on their respective significance in total output. Prices in year 2012 and 2013 are compared, where 2012 is
the base year. Base year value of any price index is 100 because base year actual prices are set equal to 100. Price index
for other years is calculated by using ‘price relative’ and compared with previous year. A price relative is the ratio of the
price of a specific product in one period to the price of the same product in some other period. Formula to calculate Price
Relative is as follows:

Price∈ period t
Price Relative = ×100
Price∈base year

Pt
P0 , t= ×100
P0

Where, Pt is the price of commodity in period t

And, P0 is the price of commodity in the base year

Commodit Unit Weight Price in Rs. Base Price Price Relative Price Relative * Weight
 y (2012) (2013) [7] * [3]
(%) (2012) (2013)
100*([6]/[4])
[1] [2] [3] [4] [5] [6] [7] [8]
A Kg 30 20 100 24 120 3600
B Mtr 20 150 100 225 150 3000
C Kg 40 40 100 50 125 5000
D Count 10 30 100 36 120 1200
100 12800
Price Index (base year, 2012): 100
Price Index (year 2013): 128

In the above example, price index was 100 in the year 2012 (because it is base year) and increased to 128 in the year
2013. Thus, price level in the year 2012 was 100 which increased to 128 in the year 2013. Price index is also used to
calculate inflation rate. There are three main concepts of inflation:
 Inflation is defined as the percentage rate of increase in general level of prices (price index). In broader sense, a
persistent and appreciable rise in general price level is considered as inflation.
 Disinflation is a decline in the rate of inflation or the rate of increase in general price level (price index).
 Deflation is a negative rate of inflation, i.e., decline in general price level (price index).

Measurement of Inflation:
 Inflation rate is measured as the percentage change in the price index. Price Index is a number which shows
weighted average of prices of goods and services and is used to compare price changes from a particular base year
with price index as 100.
 Inflation Rate = 100 * [(PIN t – PINt-1)/PINt-1]; where PIN is Price Index Number, and ‘t’ is the period for which
inflation rate is being calculated and ‘t-1’ is the period in previous year.

Price indices used in India to capture and report Inflation

Two price indices are used in India to capture and report inflation in India. These indices are Wholesale Price Index
(WPI) and Consumer Price Index (CPI).

Wholesale Price Index (WPI):

Wholesale price can be defined as the price for bulk sale at the first stage of transaction. WPI is the weighted average of
wholesale prices of a specified basket of goods (697 commodities). WPI is just an index value and it is indexed to 100 in
the base year. Year 2011-12 is the base year of current WPI series. WPI is used to calculate and report the wholesale
inflation or WPI inflation in India. WPI is calculated and reported by the Office of Economic Advisor, Government of
India.

Consumer Price Index (CPI):

A Consumer Price Index (CPI) is designed to measure the changes over time in the level of retail prices of selected goods
and services that households purchase for the purpose of consumption. Such changes affect the real purchasing power of
consumers' income and their welfare. The CPI is just an index value and it is indexed to 100 in the base year.
CPI is the weighted average of prices of a specified basket of goods and services (299 items), which are purchased by
consumers. Year 2012 is the base year of current CPI series. CPI is calculated and reported by the Central Statistics
Office (CSO), Ministry of Statistics and Program Implementation, Government of India. The CSO reports the following
three consumer price indices:
 Consumer Price Index – Rural (CPI-R)
 Consumer Price Index – Urban (CPI-U)
 Consumer Price Index – Combined (CPI-C)

Out of above three, CPI-Combined (CPI-C) is used for reporting the following 2 types of inflation at the macro level:
 Headline Inflation: It is based on change in price of all 299 commodities included in the basket of commodities for
CPI-Combined. The three major subgroups of retail inflation (base year 2012=100) are, food, beverages and tobacco
(weight =45.86%); fuel and light (6.84%); and others including clothing and footwear, housing, household goods
and services, health, education, transport and communication, recreation and amusement and personal care
(47.30%).
 Core Inflation: Inflation in non-food –non fuel group is called Core inflation.
RBI has been using headline CPI-Combined inflation as the nominal anchor for monetary policy formulation for inflation
targeting since April 2014. Before that, WPI was used as the nominal anchor for the monetary policy.

GDP deflator: Inflation may also be measured by GDP deflator:

GDP deflator = 100 * (Nominal GDP /Real GDP)
GDP deflator reflects the average rise in price of all goods and services included in the GDP with reference to the base
year. Thus it is more comprehensive.

D. MEASUREMENT OF EMPLOYMENT / UNEMPLOYMENT

Unemployment is a situation in which a person is able and willing to work at prevailing wage rate but does not get
employment. National Sample Survey Office (NSSO) defines employment and unemployment on the basis of the
following classification / activity statuses:

Labour Force
A: ‘Working’, engaged in an economic activity i.e., Employed
B. ‘Seeking’ or available for work i.e., Unemployed

Not in Labour Force

C. Neither seeking nor available for work

The detailed activity statuses under each of the three broad activity statuses (viz. ‘employed’, ‘unemployed’ and ‘not in
labour force’) and the corresponding codes used in the survey are given below:

A. ‘Working’ engaged in an economic activity i.e., Employed

1. Worked in household enterprises (self-employed) as own-account worker
2. Worked in household enterprises (self-employed) as an employer
3. Worked in household enterprises (self-employed) as helper regular wage/ salaried employee
4. Worked as regular wage/salaried employee, casual labour
5. Worked as casual wage labour in public works other than Mahatma Gandhi NREG public works
6. Worked as casual wage labour in Mahatma Gandhi NREG public works
7. Worked as casual wage labour in other types of works

B. ‘Seeking’ or available for work i.e., Unemployed

8. Did not work owing to sickness though there was work in household enterprise
9. Did not work owing to other reasons though there was work in household enterprise
10. Did not work owing to sickness but had regular salaried/wage employment
11. Did not work owing to other reasons but had regular salaried/wage employment not working but seeking/available for
work (or unemployed)
12. Sought work or did not seek but was available for work
13. Sought work
14. Did not seek but was available for work

C. Neither working nor available for work (not in labour force)

15. Attended educational institutions
16. Attended to domestic duties only
17. Attended to domestic duties and was also engaged in free collection of goods (vegetables, roots, firewood, cattle feed,
etc.), sewing, tailoring, weaving, etc. for household use
18. Rentiers, pensioners, remittance recipients, etc.
19. Not able to work owing to disability
20. Others (including beggars, prostitutes, etc.)
21. Did not work owing to sickness
22. Children of age 0-4 years

Key Employment / Unemployment Indicators

 Labour force participation rate (LFPR): defined as the number of persons in the labour force per 1000 persons
 Worker Population Ratio (WPR): defined as the number of persons employed per 1000 persons
 Proportion Unemployed (PU): defined as the number of persons unemployed per 1000 persons
 Unemployment Rate (UR): defined as the number of persons unemployed per 1000 persons in the labour force
(which includes both the employed and unemployed)
 MEASUREMENT OF UNEMPLOYMENT IN INDIA

Unemployment is a situation in which a person is able and willing to work at prevailing wage rate does not get
employment. National Sample Survey Office (NSSO) defines employment and unemployment on the basis of following
activity statuses-

1. ‘Working’ engaged in an economic activity i.e., employed

2. ‘Seeking’ or available for work i.e., unemployed
3. Neither seeking nor available for work
Only 1 and 2 constitutes labour force.

The detailed activity statuses under each of the three broad activity statuses (viz. ‘employed’, ‘unemployed’ and ‘not in
labour force’) and the corresponding codes used in the survey are given below:

Self-employed/ regular wage or salaried/ casual labour/ not working but seeking for work
(Constitutes labor force)

1. worked in household enterprises (self-employed) as own-account worker

2. worked in household enterprises (self-employed) as an employer
3. worked in household enterprises (self-employed) as helper
regular wage/ salaried employee
4. worked as regular wage/salaried employee casual labour
5. worked as casual wage labour in public works other than Mahatma Gandhi NREG public works
6. worked as casual wage labour in Mahatma Gandhi NREG public works
7. worked as casual wage labour in other types of works
8. did not work owing to sickness though there was work in household enterprise
9. did not work owing to other reasons though there was work in household enterprise
10. did not work owing to sickness but had regular salaried/wage employment
11. did not work owing to other reasons but had regular salaried/wage employment not working but seeking/available for
work (or unemployed)
12. sought work or did not seek but was available for work (for usual status approach)
13. sought work (for current weekly status approach)
14. did not seek but was available for work (for current weekly status approach)

Neither working nor available for work (or not in labour force)

15. attended educational institutions

16. attended to domestic duties only
17. attended to domestic duties and was also engaged in free collection of goods (vegetables, roots, firewood, cattle feed,
etc.), sewing, tailoring, weaving, etc. for household use
18. rentiers, pensioners, remittance recipients, etc.
19. not able to work owing to disability
20. others (including beggars, prostitutes, etc.)
21. did not work owing to sickness (for casual workers only)
22. children of age 0-4 years

NSSO follows three approaches to measure unemployment which were recommended by M. L. Dantwala committee-

1. Usual status approach- Estimates only those persons as unemployed who had no gainful work for a major time
during a year (365) days preceding the date of survey. It includes usual principal activity status and usual
subsidiary economic activity status.
2. Weekly Status approach- Records those persons as unemployed who did not have gainful work even for an hour
on any day of the week preceding date of survey.
3. Daily status approach- Unemployment is measured for each day in reference week. A person having no gainful
work even for an hour is counted unemployed. Daily status also categorises employment on the basis of hours of
work-
0-4 hours- Employed for half day

4-8 hours- Employed for full day

Daily status approach is more inclusive and had advantage from other two as it captures not only the unemployment days
of those persons who are usually unemployed but also who are recorded unemployed on weekly status basis. That is why
unemployment is recorded highestby this approach in comparison to the other two approaches.
Key Employment and Unemployment Indicators

1. Labour force participation rate (LFPR): LFPR is defined as the number of persons/ person-days in the labour force
per 1000 persons /person-days

2. Worker Population Ratio (WPR): WPR defined as the number of persons/person – days employed per 1000
persons/person-days.

3. Proportion Unemployed (PU): It is defined as the number of persons/person-days unemployed per 1000
persons/person-days.

4. Unemployment Rate (UR): UR is defined as the number of persons/person-days unemployed per 1000
persons/person-days in the labour force (which includes both the employed and unemployed)