Assume that the economy is contracting and unemployment is rising. Which of the following would be a logical explanation for a sudden fall in the unemployment rate even while the economy continues to contract?

Question

Quizplus · Accepted Answer

An increase in the number of discouraged workers can lead to a fall in the unemployment rate during economic contraction because discouraged workers are not counted as part of the labor force. If more people stop looking for work due to discouragement, the labor force shrinks, and the unemployment rate can decrease even if the economy is not adding jobs.

Assume That the Economy Is Contracting and Unemployment Is Rising