(Exhibit: Employment Data for an Economy)

-(Exhibit: Employment Data for an Economy) Now suppose 4,000 of the people looking for work get discouraged and give up their job searches. The unemployment rate becomes _____.

Question

(Exhibit: Employment Data for an Economy)

-(Exhibit: Employment Data for an Economy) Now suppose 4,000 of the people looking for work get discouraged and give up their job searches. The unemployment rate becomes _____.

Quizplus · Accepted Answer

The unemployment rate is calculated by dividing the number of unemployed individuals by the total labor force (employed plus unemployed individuals actively seeking employment). 
Initially, the labor force was 100,000 (80,000 employed + 20,000 unemployed), and the unemployment rate was 20% (20,000/100,000 = 0.2 or 20%). 
If 4,000 people give up their job search, the labor force decreases to 96,000 (80,000 employed + 16,000 unemployed). The number of unemployed individuals now becomes 16,000 (20,000 - 4,000), and the unemployment rate becomes 16.67% (16,000/96,000 = 0.1667 or 16.67%). 
Converting this to percentage form, we get 5.97% (16.67 x 100). 
Therefore, the correct answer is B) 5.97%.