When an individual who has not been working but has been looking for work decides to terminate the search process, the official unemployment rate
A) will rise.
B) will fall.
C) will remain unchanged.
D) may fall or rise depending on whether or not the individual resumes his education.

Question

Quizplus · Accepted Answer

The official unemployment rate is calculated as the percentage of the labor force (those employed plus those actively seeking work) who are unemployed. When an individual who has been seeking work decides to terminate the search process, they are no longer considered part of the labor force and are therefore not counted in the unemployment rate calculation. This results in a decrease in the unemployment rate, as the denominator (the labor force) decreases but the numerator (the number of unemployed) stays the same. Therefore, the best choice is B - the unemployment rate will fall.

When an Individual Who Has Not Been Working but Has