An increase in the labour force participation rate
A)implies that the unemployment rate must fall.
B)implies that the unemployment rate must rise.
C)means there are more discouraged workers.
D)is consistent with either a rise or a fall in the unemployment rate.

Question

Quizplus · Accepted Answer

An increase in the labour force participation rate means that more people are actively looking for work or are employed. This can lead to either a rise or a fall in the unemployment rate, depending on whether the number of job openings keeps pace with the increase in labour force participation. If job openings are available for the new entrants, it will reduce the unemployment rate. Otherwise, it will lead to a rise in the unemployment rate. Therefore, option D is correct. Option A and B are incorrect because an increase in labour force participation does not necessarily lead to a fall or a rise in the unemployment rate. Option C is incorrect because an increase in the labour force participation rate means more people are participating in the labour force and looking for work, and discouraged workers are those who have stopped looking for work, hence, they are not included in the labour force.

An Increase in the Labour Force Participation Rate