The existence of discouraged workers:
A)increases the size of the labor force, but does not affect the unemployment rate.
B)affects neither the size of the labor force nor the unemployment rate.
C)may cause the official unemployment rate to understate the true amount of unemployment.
D)may cause the official unemployment rate to overstate the true amount of unemployment.

Question

The existence of discouraged workers:
A)​increases the size of the labor force, but does not affect the unemployment rate.
B)​affects neither the size of the labor force nor the unemployment rate.
C)​may cause the official unemployment rate to understate the true amount of unemployment.
D)​may cause the official unemployment rate to overstate the true amount of unemployment.

Quizplus · Accepted Answer

Discouraged workers are those who have given up looking for work and are no longer counted in the labor force. Their existence may cause the official unemployment rate to understate the true amount of unemployment because they are not included in the calculation of the unemployment rate. Therefore, choice C is the correct answer.

The Existence of Discouraged Workers