The discouraged-worker effect indicates that:
A)married women will enter the labor force to maintain household living standards after their husbands' wages have fallen
B)some unemployed persons in the labor force actively seek employment
C)some unemployed workers will decide to withdraw from the labor force as the unemployment rate increases
D)the labor force participation rate varies directly with the unemployment rate

Question

Quizplus · Accepted Answer

The discouraged-worker effect indicates that some unemployed workers will decide to withdraw from the labor force as the unemployment rate increases. These workers become discouraged and stop actively looking for work, which causes the labor force participation rate to decrease. Option A is incorrect as it refers to a different phenomenon of married women entering the labor force to maintain household living standards. Option B is incorrect as it refers to unemployed persons actively seeking employment, which is not related to the discouraged-worker effect. Option D is incorrect as it assumes a direct relationship between the labor force participation rate and the unemployment rate, which is not always the case.

The Discouraged-Worker Effect Indicates That