If a large number of people are classified as being out of the labor force when they are really looking for work, this will lead to an official unemployment rate that is lower than the true unemployment rate.

Question

Quizplus · Accepted Answer

The official unemployment rate only counts people as unemployed if they are actively looking for work. If people who are looking for work are mistakenly classified as not being in the labor force, they are not counted as unemployed, which would result in an understated unemployment rate.

If a Large Number of People Are Classified as Being