Chapter 12, Problem 6MCQ

To determine

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

Explanation of Solution

The unemployment rate is not a true measurement of the unemployment problem in a country because there are a few factors that may understate and overstate the unemployment rate.

• The unemployment rate understates the unemployment problem in the market because it doesn’t include discouraged workers, underemployed workers, and marginally attached workers.
• The unemployment rate overstates the unemployment problem in the market because it counts the people who are lying about searching for a job to get unemployment benefits and also the candidates who have offers for jobs but have not accepted the job as they are taking time to shift between available jobs, as unemployed.

So, option “a” is correct because of a person who willingly takes time to shift between the available offers.

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.