If a large number of individuals file unemployment claims while working in the underground economy:
A)the unemployment rate overstates the level of unemployment.
B)the unemployment rate understates the level of unemployment.
C)the accuracy of the unemployment rate is not affected.
D)discouraged worker statistics will underestimate the true state of frustration by job seekers.

Question

If a large number of individuals file unemployment claims while working in the underground economy:
A)​the unemployment rate overstates the level of unemployment.
B)​the unemployment rate understates the level of unemployment.
C)​the accuracy of the unemployment rate is not affected.
D)​discouraged worker statistics will underestimate the true state of frustration by job seekers.

Quizplus · Accepted Answer

When individuals file for unemployment claims while still earning income through the underground economy, they are not truly unemployed in the economic sense. This situation leads to an overstatement of the unemployment rate because these individuals are counted as unemployed in official statistics, despite having income sources.

If a Large Number of Individuals File Unemployment Claims While