The participation rate is
A) countercyclical
B) more variable than GDP
C) procyclical
D) a leading variable

Question

Quizplus · Accepted Answer

The participation rate tends to be procyclical, meaning that it increases during periods of economic expansion and decreases during periods of recession. This is because people are more likely to participate in the labor force when they perceive that there are good job opportunities available, and less likely to do so when job prospects are poor. The participation rate is also generally more variable than GDP, as it can be affected by a wide range of factors such as demographic trends, social norms, and public policy changes. Finally, while the participation rate may have some predictive power for the overall level of economic activity, it is not usually considered to be a leading variable in the sense that it signals future changes in GDP or other key economic indicators.

The Participation Rate Is