If a large number of workers are classified as being out of the labor force when they are really looking for work, this will lead to an official unemployment rate that is
A) overstated.
B) understated.
C) neither overstated or understated.
D) unbiased.

Question

Quizplus · Accepted Answer

If a large number of workers who are actually looking for work are classified as being out of the labor force, then the official unemployment rate will be understated. This is because only those individuals who are classified as being in the labor force and are actively seeking employment are counted as unemployed. If a large number of individuals are incorrectly classified as being out of the labor force, the unemployment rate will fail to account for them and therefore will be lower than it should be.

If a Large Number of Workers Are Classified as Being