A survey reveals that, on a small island, initially 40 people have jobs, 10 people are not working but are looking for jobs, and 30 people are neither working nor looking for work. Suppose that 10 of the 30 people who weren't working or looking for work now begin looking for work. There are now 20 people without jobs but looking for work and 40 people working. The unemployment rate:
A) rises to 33.3%.
B) rises to 50%.
C) falls to 25%.
D) Nothing happens to the unemployment rate because these people weren't working before and they aren't working now.

Question

Quizplus · Accepted Answer

The unemployment rate is calculated as the number of unemployed people looking for work divided by the labor force (those working plus those looking for work). Initially, the unemployment rate was 10/(40+10) = 20%. After the change, it becomes 20/(40+20) = 33.3%.

A Survey Reveals That, on a Small Island, Initially 40