Subject - Economics:

Macroeconomics

MCQ - 52-4062

Question:

What does the presence of discouraged workers do to the measurement of the unemployment rate?

Discouraged workers are counted as “out of the labor force,” thus the unemployment rate is understated, making the economy look stronger than it is.
Discouraged workers are counted as “out of the labor force,” thus the unemployment rate is understated, making the economy look weaker than it is.
Discouraged workers are not surveyed, so there is no impact on the unemployment rate.
Discouraged workers are counted as “out of the labor force,” thus the unemployment rate is understated, making the economy look weaker than it is.
Discouraged workers are counted as “unemployed,” thus the unemployment rate is overstated, making the economy look weaker than it is.

Correct Answer: A

Explanation:

The BLS only counts a worker as “unemployed” if he or she is actively seeking work. A discouraged worker is, by definition, not seeking work and so the worker’s omission from the unemployment rate understates this measure of economic health, making the economy look better than it is.

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