The presence of discouraged workers:
A)increases the size of the labour force, but does not affect the unemployment rate.
B)reduces the size of the labour force, but does not affect the unemployment rate.
C)may cause the official unemployment rate to understate the amount of unemployment.
D)may cause the official unemployment rate to overstate the amount of unemployment.

Question

Quizplus · Accepted Answer

Discouraged workers are those who have given up looking for work and are not actively seeking employment. As a result, they are not included in the official unemployment rate. This means that the official rate may underestimate the true amount of unemployment in the economy, as it does not take into account these discouraged workers. Therefore, the presence of discouraged workers may cause the official unemployment rate to understate the amount of unemployment.

The Presence of Discouraged Workers