Statement I: It is possible for the unemployment rate to decline while the total employment declines.
Statement II: It is possible for the unemployment rate to decline while the number of unemployed people stays the same.

Question

Quizplus · Accepted Answer

Statement I is true because the unemployment rate can decline if the labor force (the sum of employed and unemployed individuals actively seeking work) decreases faster than the total employment. This could happen if people retire, go back to school, or otherwise stop looking for work. Statement II is true because the unemployment rate can decline if the labor force grows at the same rate as employment, keeping the number of unemployed people constant but decreasing the unemployment rate as a percentage of the larger labor force.

Statement I: It Is Possible for the Unemployment Rate to Decline