People who were working in the formal sector and now work in the underground economy but report being unemployed will cause the unemployment rate to ________, and this action tends to ________ the unemployment rate.

Question

Quizplus · Accepted Answer

When individuals who were previously working in the formal sector start working in the underground economy but report being unemployed, they are still counted as unemployed in official statistics. This increases the unemployment rate because they are not recognized as employed. However, since they are actually working (albeit in the underground economy), the unemployment rate is overstated, implying that the situation seems worse than it actually is.

People Who Were Working in the Formal Sector and Now