Question

Suppose there are 5 million unemployed workers seeking jobs. After a period of time, 1 million of them become discouraged over their job prospects and cease to look for work. As a result of this, all else equal, the official unemployment rate would:
A. decline.
B. increase.
C. increase in the short run but eventually decline.
D. be unchanged.

Answer 1

Answer: Decline.

Explanation:

If a million job seekers out of 5 million job seekers, get discouraged and stop job hunting, the unemployment rate would be recorded to have dropped, because it would mean that there are fewer individuals that are seeking for employment( in this case 4million).