Other things equal, as the number of discouraged workers rises in an economy, the gap between potential and actual real GDP will widen.

Question

Quizplus · Accepted Answer

Discouraged workers are individuals who have given up looking for work, and therefore are not included in the unemployment rate. As the number of discouraged workers rises, the labor force participation rate decreases, which in turn lowers potential real GDP. This widening gap between potential and actual real GDP is due to the fact that fewer workers are producing goods and services, resulting in a decrease in economic output.

Other Things Equal, as the Number of Discouraged Workers Rises