Practice question · True or false
If many discouraged workers stop looking for jobs, the measured unemployment rate can fall even though no one found work.
Hints
- Leaving the search removes a person from both parts of the fraction.
- The rate can improve without a single job being found.
Show the answer
True
Why
Leaving the search removes them from the labor force, the denominator and numerator shrink together, flattering the rate. Falling unemployment is only good news if employment actually rose.
Practise Macroeconomic Indicators
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