A survey reveals that, on a small island, initially 1,000 people have jobs, 250 people are not working but are looking for jobs, and 450 people are neither working nor looking for work. Suppose that 150 of the 450 people who weren't looking for work now begin looking for work. There are now 400 people looking for work and 1,000 people working. The unemployment rate:
A) falls to 20%.
B) rises to 28.6%.
C) rises to 50%.
D) Nothing happens to the unemployment rate because these people weren't working before and they aren't working now.

Question

Quizplus · Accepted Answer

Initially, there were 250 people looking for jobs out of a total population of 1,700 (1,000+250+450). This gives an unemployment rate of (250/1,700) = 14.7%.
After 150 of the 450 people who weren't looking for work start looking for work, the number of people looking for work increases to 400. The unemployment rate is then (400/1,400) = 28.6% (1,000+400). Therefore, the unemployment rate has risen to 28.6%.

A Survey Reveals That, on a Small Island, Initially 1,000