Suppose 20 million people are employed, and 5 million are unemployed. What is the unemployment rate? Does that number change if we also state that there are an additional 30 million people who are not in the civilian labor force?

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12 Suppose 20 million people are employed, and 5 million are unemployed. What is the unemployment rate? Does that number change if we also state that there are an additional 30 million people who are not in the civilian labor force?
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Imagine you are a senior statistician with a national statistical agency. The economists who work for the presidential economic council are complaining that underground economy is so large that the GDP calculation are misleading as a measure of standard of living.

a. Explain why large underground economy makes GDP numbers misleading as a measure of the standard of living.

b. Suggest how you could alleviate this problem (i.e., account for the underground economy)

 

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