Consider the following scenario. In March 2006, 40,000 people are employed, 10,000 people are actively looking for work, and 30,000 people are neither working nor looking for work. In April, 12,000 of the 30,000 people who were not looking for work begin their job search. Holding all else constant, the unemployment rate in April will rise to _____.

Question

Quizplus · Accepted Answer

The unemployment rate is the percentage of the labor force that is unemployed. The labor force is the sum of the employed and unemployed. In March, the labor force is 40,000 + 10,000 = 50,000. The unemployment rate is 10,000 / 50,000 = 20%. In April, the labor force is 40,000 + 10,000 + 12,000 = 62,000. The unemployment rate is 10,000 / 62,000 = 16.13%.

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