Question

What happens to the labor force participation rate when employed individuals are reclassified as unemployed? What happens when they are reclassified as discouraged workers?

a) The labor force participation rate decreases; it remains unchanged.
b) The labor force participation rate increases; it decreases.
c) The labor force participation rate increases; it remains unchanged.
d) The labor force participation rate decreases; it increases.

Answer 1

The correct option is a. When employed individuals are reclassified as unemployed, the labor force participation rate decreases. When they are reclassified as discouraged workers, the labor force participation rate remains unchanged.

Step-by-step explanation:

When employed individuals are reclassified as unemployed, the labor force participation rate decreases. This is because unemployed individuals are not actively participating in the labor force by seeking employment.

When employed individuals are reclassified as discouraged workers, the labor force participation rate remains unchanged. Discouraged workers are individuals who have given up looking for employment, so they are also not actively participating in the labor force.