Chapter 12, Problem 5MCQ

To determine

The question requires us to determine the factor which may understate the unemployment rate.

Explanation of Solution

The unemployment rate understates the unemployment problem in the market because it doesn’t include discouraged workers, underemployed workers, and marginally attached workers.

Discouraged workers are workers who want to get a job but are not currently looking for a job due to the non-availability of jobs in the market.

So, option “b” is correct.

The options are incorrect because the people who are lying about searching for a job to get unemployment benefits and also the candidates who have offers for a job but have not accepted the job are considered unemployed. Such unemployment overstates the problem of unemployment in the market.

The workers who are doing multiple jobs to gain benefits and higher income are considered over-employed workers and counted as employed in the labor market.

Economics Concept Introduction

People are considered unemployed if they are not working currently but actively looking for a job.

The unemployment rate is the ratio of the number of unemployed people to the labor force in an economy.

  $\text{Unemployment}\text{rate = }\frac{\text{Number}\text{of}\text{unemployed}\text{people}}{\text{Labor}\text{force}}\text{×100}$

Where the labor force is the sum of employed and unemployed people in an economy.