Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking

Economics Sep 06, 2020

Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate?

It would increase.

It would fall.

It would not change.

It would change, but the effect cannot be predicted.

Expert Solution

Unemployed people who have looked for a job for more than six months gave up in despair and stopped looking will be considered as discouraged workers and discouraged workers will not count in unemployment rate so, the unemployment rate would fall.

The correct option is 2). It would fall

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