The added-worker effect suggests that:
A)higher wages will attract more persons into the labor market during market expansions
B)when one family member loses a job,other family members may enter the labor force
C)the measured unemployment rate probably understates the true economic hardship associated with unemployment
D)the labor force participation rate will fall as the unemployment rate rises

Question

Quizplus · Accepted Answer

The added-worker effect refers to the phenomenon that when one family member loses a job, other family members may enter the labor force to make up for lost income. Therefore, choice B is the correct answer. Choice A is referring to the elasticity of labor supply, and choice C is discussing the concept of discouraged workers. Choice D is incorrect because as the unemployment rate rises, the labor force participation rate may remain steady or even increase as people who were previously discouraged from seeking work may begin to look for jobs again.

The Added-Worker Effect Suggests That