Suppose that some people report themselves as unemployed when, in fact, they are working in the underground economy. If these persons were counted as employed, how would the labour statistics change?
A) The unemployment rate and the labour-force participation rate would be higher.
B) The unemployment rate and the labour-force participation rate would be lower.
C) The unemployment rate would be higher, and the labour-force participation rate would be lower.
D) The unemployment rate would be lower, and the labour-force participation rate would be unaffected.

Question

Quizplus · Accepted Answer

If these individuals were counted as employed, the unemployment rate would decrease because there would be fewer people classified as unemployed. The labour-force participation rate would remain unchanged because these individuals are already part of the labour force, whether they are classified as employed or unemployed.

Suppose That Some People Report Themselves as Unemployed When, in Fact