Which one of the following statements is correct?
A)The added-worker effect and the discouraged-worker effect operate in the same direction
B)The added-worker effect and the discouraged-worker effect operate in different directions
C)The added-worker effect is relatively strong as the economy expands and wages rise
D)The discouraged-worker effect is relatively strong as the economy expands and wages rise

Question

Quizplus · Accepted Answer

The added-worker effect and the discouraged-worker effect operate in different directions. The added-worker effect refers to the phenomenon where when one household member becomes unemployed, another member enters the labor force to make up for lost income. On the other hand, the discouraged-worker effect refers to the phenomenon where job seekers become so discouraged that they stop looking for work, thereby reducing the labor force participation rate. These two effects are opposite in direction, so they cannot operate in the same direction.

Which One of the Following Statements Is Correct