The participation rate tends to be procyclical because

Question

Quizplus · Accepted Answer

The participation rate is defined as the number of people in the labour force divided by the total population aged 15 and over. During economic expansions, many people who were previously discouraged from seeking work may start to look for jobs again, increasing the size of the labour force and pushing up the participation rate. Conversely, during economic contractions, some people who were previously employed may become discouraged and leave the labour force, decreasing the size of the labour force and pushing down the participation rate. Therefore, the participation rate tends to be procyclical, and choice A correctly identifies the reason why.

The Participation Rate Tends to Be Procyclical Because