Empirical evidence suggests that the:
A)added-worker effect dominates the discouraged-worker effect; the participation rate varies inversely with the unemployment rate
B)discouraged-worker effect dominates the added-worker effect; the participation rate varies inversely with the unemployment rate
C)added-worker effect dominates the discouraged-worker effect; the participation rate varies directly with the unemployment rate
D)discouraged-worker effect dominates the added-worker effect; the participation rate varies directly with the unemployment rate

Question

Quizplus · Accepted Answer

The discouraged-worker effect, where individuals stop looking for work because they are discouraged by their job prospects, tends to dominate the added-worker effect, where individuals enter the workforce in response to someone else in their household losing a job. This leads to a situation where the participation rate varies inversely with the unemployment rate, as more people drop out of the labor force when unemployment is high.

Empirical Evidence Suggests That The