The following information is about a hypothetical economy:
Full-time employed = 80
Part-time employed = 25
Unemployed = 15
Discouraged workers = 5
Members of underground economy = 6
Consumer Price Index = 110
-Refer to the above information.If 6 members of the labour force are presently counted as part of the unemployed when in fact they are employed,the official unemployment rate is overstated by:

Question

Quizplus · Accepted Answer

The official unemployment rate is calculated as the number of unemployed divided by the total labor force. The total labor force is the sum of the full-time employed, part-time employed, unemployed, and discouraged workers. In this case, the total labor force is 80 + 25 + 15 + 5 = 125. The official unemployment rate is therefore 15 / 125 = 12%. If 6 members of the labor force are presently counted as part of the unemployed when in fact they are employed, the actual number of unemployed is 15 - 6 = 9. The actual unemployment rate is therefore 9 / 125 = 7.2%. The official unemployment rate is therefore overstated by 12% - 7.2% = 4.8 percentage points.

The Following Information Is About a Hypothetical Economy