If discouraged workers were counted as unemployed, then as output increased the unemployment rate would

Question

Quizplus · Accepted Answer

When output increases, it typically leads to job creation, encouraging discouraged workers to re-enter the labor force and start looking for work again. If these re-entering workers are immediately counted as unemployed (since they don't have a job yet but are actively looking), the unemployment rate would temporarily show a smaller decrease or even an increase, because the denominator (labor force) increases with the addition of discouraged workers now counted as unemployed. However, since the question assumes these individuals are counted as unemployed from the start, their transition into employment as output increases would lead to a more significant decrease in the unemployment rate compared to a scenario where they are not counted at all. This is because their employment directly reduces the number of unemployed in the calculation, without the initial increase in the unemployment rate when they first re-enter the labor force and start looking for jobs.

If Discouraged Workers Were Counted as Unemployed, Then as Output