When does the unemployment rate increase?
A) It increases whenever the number of persons classified as unemployed increases.
B) It increases whenever the number of unemployed increases relative to the size of the labour force.
C) It increases whenever the size of the labour force decreases.
D) It increases whenever the size of the labour force decreases and the number of unemployed decreases.

Question

When does the unemployment rate increase?  
A) It increases whenever the number of persons classified as unemployed increases. 
B) It increases whenever the number of unemployed increases relative to the size of the labour force. 
C) It increases whenever the size of the labour force decreases. 
D) It increases whenever the size of the labour force decreases and the number of unemployed decreases.

Quizplus · Accepted Answer

The unemployment rate is calculated as the number of persons classified as unemployed divided by the size of the labour force. Therefore, the unemployment rate increases whenever the number of unemployed increases relative to the size of the labour force. Option A is incorrect because the unemployment rate may not increase if the size of the labour force remains constant, but the number of unemployed people decreases. Option C is incorrect because the unemployment rate may not increase if the size of the labour force decreases, but the number of unemployed people decreases even more. Option D is incorrect because the unemployment rate may not increase if both the size of the labour force and the number of unemployed people decrease proportionally.

When Does the Unemployment Rate Increase