Question

Suppose 500,000 full-time undergraduate students (i.e. students that do not have any job) graduate on Sunday, 5 May 2018. All 500,000 begin to look for work on Monday, 6 May 2018; and all 500,000 are hired immediately and begin to work on that day, Monday. Ignore any other labor market activity that may happen in May, 2018. Since there was no loss of time searching for a job, the hiring of these 500,000 former college students would have no effect on the unemployment rate for may 2018. State whether the last statement is TRUE OR FALSE, then EXPLAIN WHY.

Answer 1

"False"

There will be an effect on the unemployment rate. The unemployment rate can be defined as the percentage of people unemployed divided by the total workforce. New graduates will increase the workforce and decrease the unemployment rate.

For example, there were total 20,00,000 people in the workforce and out of which 200,000 were unemployed. the unemployment rate will be 200,000 / 20,00,000. After the graduates become part of the workforce the new rate will be 200,000 / 25,00,000 and the rate will decrease.