When an economy experiences hidden unemployment,
A)its labour force increases,but the level of employment remains unchanged.
B)the true rate of unemployment may exceed the official rate.
C)the true rate of unemployment may be less than the official rate.
D)the labour force may shrink and the unemployment rate may increase.

Question

Quizplus · Accepted Answer

Hidden unemployment refers to workers who have given up looking for a job or who are not counted in official unemployment statistics. Hence, the true rate of unemployment may exceed the official rate. Option A is incorrect because hidden unemployment does not increase the size of the labour force. Option C is also incorrect because hidden unemployment leads to an underestimation of the true rate of unemployment. Option D is incorrect as hidden unemployment may not necessarily lead to a shrinking of the labour force.

When an Economy Experiences Hidden Unemployment