Question

Which of the following can be responsible for a drop in the unemployment rate?

Choose one or more:

A. There is an increase in the number of discouraged workers.

B. The labor force shrinks.

C. More people become employed.

D. More people with full-time jobs become part-time workers.

Answer 1

Option A and C

• The unemployment rate refers to the percentage of people unemployed to the percentage of people currently present in the labour force.
• It can drop when the number of discouraged workers increases and when more people become employed.
• Discouraged workers are those who have currently given up looking for jobs and are not actively participating in the labour force. Hence when they increase in number, the unemployment rate will fall.
• When more and more people join the labour force, the unemployment rate falls rapidly.