Question

In a small country, there are 100 million people in the labor force with 5 million unemployed and an unemployment rate of 5%. Recently the country announced that it has officially entered a recession. You run across an article on your phone that state the labor force has reached 125 million and 25 million people are unemployed with unemployment rate of 20%. This rapid rise in unemployment can be explained by the _________ .

Select the correct answer below:

• discouraged worker effect

• coronavirus effect

• desperate worker effect

• added-worker effect

Answer 1

As per the definition of the unemployment rate, the people who are still actively looking for a job, but has not found one for themselves as yet are called unemployed people.

The answer will not be discouraged worker effect because discouraged workers are those who have given up looking for a job because they believe there aren't any jobs available. Hence, technically, they will not be a part of the unemployed people.

It shall be noted that the labor force increased from 100 million to 125 million and unemployed lots increased from 5 million to 25 million and that the economy has entered into recession.

Thus, it would be the combined elements of the effect of desperate worker effect and added-worker effect, which may lead to a sudden increase in unemployment numbers. Thus, either of the effects is not the only cause.

Thus, the correct answer is coronavirus effect