The official definition of unemployment:
A) overstates the unemployment rate by not accounting for underemployed workers.
B) understates the unemployment rate by not accounting for members of the armed forces.
C) understates the unemployment rate by not accounting for discouraged workers.
D) overstates the unemployment rate by not accounting for discouraged workers.

Question

Quizplus · Accepted Answer

Discouraged workers are those who have given up looking for work because they believe no jobs are available for them, and they are not included in the official unemployment rate. This means that the official definition of unemployment understates the true rate of unemployment in the economy. However, the other options are incorrect: option A is referring to the concept of underemployment, which is different from unemployment; option B is incorrect because members of the armed forces are not included in the civilian labor force so they are not counted as unemployed or employed; and option D is incorrect because discouraged workers are not included in the official definition of unemployment, so they cannot overstate the rate of unemployment.

The Official Definition of Unemployment